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While Reach plc (LON:RCH) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the LSE over the last few months, increasing to UK£0.80 at one point, and dropping to the lows of UK£0.63. 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 Reach's current trading price of UK£0.65 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 Reach’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 Reach
What Is Reach Worth?
Good news, investors! Reach is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. we find that Reach’s ratio of 6.4x is below its peer average of 19.28x, which indicates the stock is trading at a lower price compared to the Media industry. Reach’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 industry peers, 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.
What does the future of Reach 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. With profit expected to grow by 85% over the next couple of years, the future seems bright for Reach. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? Since RCH is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With a positive profit 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 price multiple.