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Regis Healthcare Limited (ASX:REG), is not the largest company out there, but it saw significant share price movement during recent months on the ASX, rising to highs of AU$1.44 and falling to the lows of AU$0.94. 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 Regis Healthcare's current trading price of AU$0.94 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 Regis Healthcare’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in Regis Healthcare?
Regis Healthcare appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Regis Healthcare’s ratio of 75.5x is above its peer average of 29.84x, which suggests the stock is trading at a higher price compared to the Healthcare industry. Another thing to keep in mind is that Regis Healthcare’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.
What does the future of Regis Healthcare look like?
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. Regis Healthcare'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? REG’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe REG should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on REG for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for REG, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you'd like to know more about Regis Healthcare as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 4 warning signs for Regis Healthcare you should know about.
If you are no longer interested in Regis Healthcare, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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