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Renold plc (LON:RNO), is not the largest company out there, but it saw a significant share price rise of 49% in the past couple of months on the AIM. The company is now trading at yearly-high levels following the recent surge in its share price. 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 Renold’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
View our latest analysis for Renold
What's The Opportunity In Renold?
The stock seems fairly valued at the moment according to our valuation model. It’s trading around 18% below our intrinsic value, which means if you buy Renold today, you’d be paying a fair price for it. And if you believe that the stock is really worth £0.65, then there’s not much of an upside to gain from mispricing. Furthermore, Renold’s low beta implies that the stock is less volatile than the wider market.
Can we expect growth from Renold?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Renold, it is expected to deliver a negative earnings growth of -4.2%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? RNO seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on RNO for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on RNO should the price fluctuate below its true value.