RE/MAX Holdings, Inc. (NYSE:RMAX), which is in the real estate business, and is based in United States, received a lot of attention from a substantial price increase on the NYSE over the last few months. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine RE/MAX Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in RE/MAX Holdings?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 18% below my intrinsic value, which means if you buy RE/MAX Holdings today, you’d be paying a fair price for it. And if you believe that the stock is really worth $45.54, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that RE/MAX Holdings’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 RE/MAX Holdings generate?
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. However, with a negative profit growth of -7.5% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for RE/MAX Holdings. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? RMAX 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 RMAX for a while, now may not be the most advantageous 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. Furthermore, 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 crystalize your views on RMAX should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on RE/MAX Holdings. You can find everything you need to know about RE/MAX Holdings in the latest infographic research report. If you are no longer interested in RE/MAX Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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