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RCS MediaGroup S.p.A. (BIT:RCS), which is in the media business, and is based in Italy, saw significant share price movement during recent months on the BIT, rising to highs of €0.97 and falling to the lows of €0.81. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether RCS MediaGroup's current trading price of €0.87 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at RCS MediaGroup’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for RCS MediaGroup
Is RCS MediaGroup still cheap?
Great news for investors – RCS MediaGroup is still trading at a fairly cheap price. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that RCS MediaGroup’s ratio of 6x is below its peer average of 15.07x, which suggests the stock is undervalued compared to the Media industry. However, given that RCS MediaGroup’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of RCS MediaGroup look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of RCS MediaGroup, it is expected to deliver a negative revenue growth of -0.6% next year, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Although RCS is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to RCS, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on RCS for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.