Rocky Mountain Dealerships Inc (TSX:RME), a capital goods company based in Canada, saw significant share price volatility over the past couple of months on the TSX, rising to the highs of $11.6 and falling to the lows of $9.84. 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 RME's current trading price of $10.63 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 RME’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 Rocky Mountain Dealerships
What is RME worth?
Great news for investors – RME is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is $16.13 which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, RME’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because RME’s stock is less volatile than the wider market given its low beta.
Can we expect growth from RME?
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. With profit expected to grow by 25.36% over the next year, the near-term future seems bright for RME. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? Since RME is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on RME for a while, now might be the time to enter the stock. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy RME. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Rocky Mountain Dealerships. You can find everything you need to know about RME in the latest infographic research report. If you are no longer interested in Rocky Mountain Dealerships, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass 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.