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Is Raute Oyj (HEL:RAUTE) Potentially Undervalued?

Simply Wall St

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Raute Oyj (HEL:RAUTE), which is in the machinery business, and is based in Finland, received a lot of attention from a substantial price movement on the HLSE over the last few months, increasing to €27.3 at one point, and dropping to the lows of €22.4. 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 Raute Oyj's current trading price of €22.6 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 Raute Oyj’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Raute Oyj

Is Raute Oyj still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 2.1% below my intrinsic value, which means if you buy Raute Oyj today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth €23.09, 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 Raute Oyj’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.

Can we expect growth from Raute Oyj?

HLSE:RAUTE Past and Future Earnings, July 15th 2019

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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Raute Oyj, at least in the near future.

What this means for you:

Are you a shareholder? Currently, RAUTE appears to be trading around its fair value, 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 tabs on RAUTE for a while, now may not be the most optimal 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 gel your views on RAUTE 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 Raute Oyj. You can find everything you need to know about Raute Oyj in the latest infographic research report. If you are no longer interested in Raute Oyj, 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 editorial-team@simplywallst.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.