RedHill Education Limited (ASX:RDH), a consumer services company based in Australia, saw a significant share price rise of over 20% in the past couple of months on the ASX. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine RedHill Education’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. Check out our latest analysis for RedHill Education
What is RedHill Education worth?
Good news, investors! RedHill Education is still a bargain right now. According to my valuation, the intrinsic value for the stock is A$6.66, but it is currently trading at AU$2.40 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because RedHill Education’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.
Can we expect growth from RedHill Education?
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. In the upcoming year, RedHill Education’s earnings are expected to increase by 39.89%, 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 RDH is currently undervalued, it may be a great time to accumulate more of 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 financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on RDH for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy RDH. 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 investment decision.