Is Now The Time To Look At Buying Royal Bank of Canada (TSE:RY)?
Let’s talk about the popular Royal Bank of Canada (TSE:RY). The company’s shares received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$104.78 at one point, and dropping to the lows of CA$94.02. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Royal Bank of Canada’s current trading price of CA$95.33 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Royal Bank of Canada’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Royal Bank of Canada
Is Royal Bank of Canada still cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 11% below my intrinsic value, which means if you buy Royal Bank of Canada today, you’d be paying a reasonable price for it. And if you believe the company’s true value is CA$107.62, then there’s not much of an upside to gain from mispricing. Furthermore, it seems like Royal Bank of Canada’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Royal Bank of Canada?
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. Royal Bank of Canada’s earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? RY’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on RY, 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Royal Bank of Canada. You can find everything you need to know about Royal Bank of Canada in the latest infographic research report. If you are no longer interested in Royal Bank of Canada, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
