Renta Corporación Real Estate, S.A. (BME:REN), which is in the real estate business, and is based in Spain, saw a significant share price rise of over 20% in the past couple of months on the BME. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Renta Corporación Real Estate’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What is Renta Corporación Real Estate worth?
According to my valuation model, Renta Corporación Real Estate seems to be fairly priced at around 17% below my intrinsic value, which means if you buy Renta Corporación Real Estate today, you’d be paying a reasonable price for it. And if you believe the company’s true value is €2.14, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Renta Corporación Real Estate’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 Renta Corporación Real Estate generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 40% over the next couple of years, the future seems bright for Renta Corporación Real Estate. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? REN’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 track record of its management team. 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 an eye on REN, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining 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 Renta Corporación Real Estate. You can find everything you need to know about Renta Corporación Real Estate in the latest infographic research report. If you are no longer interested in Renta Corporación Real Estate, 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 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.
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