The Gorman-Rupp Company (NYSE:GRC), which is in the machinery business, and is based in United States, saw a decent share price growth in the teens level on the NYSE over the last few months. 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? Today I will analyse the most recent data on Gorman-Rupp’s outlook and valuation to see if the opportunity still exists.
What's the opportunity in Gorman-Rupp?
The stock is currently trading at US$33.74 on the share market, which means it is overvalued by 22.84% compared to my intrinsic value of $27.47. This means that the opportunity to buy Gorman-Rupp at a good price has disappeared! In addition to this, it seems like Gorman-Rupp’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Gorman-Rupp generate?
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. Though in the case of Gorman-Rupp, it is expected to deliver a relatively unexciting earnings growth of 4.0%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for Gorman-Rupp, at least in the near term.
What this means for you:
Are you a shareholder? GRC’s future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe GRC should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 GRC for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Gorman-Rupp. You can find everything you need to know about Gorman-Rupp in the latest infographic research report. If you are no longer interested in Gorman-Rupp, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.