Courts Asia Limited (SGX:RE2), a specialty retail company based in Singapore, saw significant share price volatility over the past couple of months on the SGX, rising to the highs of SGD0.33 and falling to the lows of SGD0.28. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Courts Asia’s current trading price of SGD0.28 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 Courts Asia’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for Courts Asia

What’s the opportunity in Courts Asia?

Good news, investors! Courts Asia is still a bargain right now. My valuation model shows that the intrinsic value for the stock is SGD1.5, but it is currently trading at S$0.28 on the share market, meaning that there is still an opportunity to buy now. Courts Asia’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

Can we expect growth from Courts Asia?

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. Courts Asia’s earnings over the next few years are expected to increase by 23.30%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since RE2 is currently undervalued, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on RE2 for a while, now might be the time to enter the stock. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy RE2. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.