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While Randstad N.V. (AMS:RAND) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the ENXTAM over the last few months, increasing to €44.90 at one point, and dropping to the lows of €40.30. 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 Randstad's current trading price of €41.00 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Randstad’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Randstad
What's The Opportunity In Randstad?
The share price seems sensible at the moment according to our price multiple model, where we compare 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 Randstad’s ratio of 16.82x is trading slightly below its industry peers’ ratio of 16.82x, which means if you buy Randstad today, you’d be paying a reasonable price for it. And if you believe that Randstad should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. So, is there another chance to buy low in the future? Given that Randstad’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Randstad generate?
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 77% over the next couple of years, the future seems bright for Randstad. 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? It seems like the market has already priced in RAND’s positive outlook, with shares trading around industry price multiples. 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 RAND? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?