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Rai Way SpA (BIT:RWAY), which is in the media business, and is based in Italy, saw significant share price volatility over the past couple of months on the BIT, rising to the highs of €5.08 and falling to the lows of €4.08. 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 Rai Way’s current trading price of €4.31 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 Rai Way’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 Rai Way
What’s the opportunity in Rai Way?
Rai Way appears to be overvalued by 41.03% at the moment, based on my discounted cash flow valuation. The stock is currently priced at €4.31 on the market compared to my intrinsic value of €3.05. This means that the opportunity to buy Rai Way at a good price has disappeared! But, is there another opportunity to buy low in the future? Given that Rai Way’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 Rai Way 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. 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 Rai Way, it is expected to deliver a relatively unexciting earnings growth of 7.6%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in RWAY’s future outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe RWAY should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.