RIB Software SE (ETR:RIB), which is in the software business, and is based in Germany, led the XTRA gainers with a relatively large price hike in the past couple of weeks. 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 RIB Software’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for RIB Software
Is RIB Software still cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 17.23% above my intrinsic value, which means if you buy RIB Software today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is €17.57, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because RIB Software’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of RIB Software 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. RIB Software’s earnings over the next few years are expected to increase by 44%, 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? It seems like the market has already priced in RIB’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on RIB, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.