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Renewi plc (LON:RWI), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the LSE. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine Renewi’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for Renewi
Is Renewi Still Cheap?
Great news for investors – Renewi is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is £8.13, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Renewi’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 kind of growth will Renewi generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -1.7% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Renewi. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although RWI 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 RWI, 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 RWI 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.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Renewi has 1 warning sign and it would be unwise to ignore it.
If you are no longer interested in Renewi, you can use our free platform to see our list of over 50 other stocks with a high growth potential.