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Reservoir Media, Inc. (NASDAQ:RSVR), might not be a large cap stock, but it saw a decent share price growth in the teens level on the NASDAQGM over the last few months. As a small cap stock, which tends to lack high analyst coverage, 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 take a look at Reservoir Media’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for Reservoir Media
What's The Opportunity In Reservoir Media?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 1.7% below my intrinsic value, which means if you buy Reservoir Media today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $6.10, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Reservoir Media’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Reservoir Media look like?
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. Reservoir Media's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has already priced in RSVR’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on RSVR, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.