Should You Think About Buying Randstad N.V. (AMS:RAND) Now?
Today we're going to take a look at the well-established Randstad N.V. (AMS:RAND). The company's stock saw a decent share price growth in the teens level on the ENXTAM over the last few months. With many analysts covering the large-cap 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? Today I will analyse the most recent data on Randstad’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for Randstad
Is Randstad Still Cheap?
Good news, investors! Randstad is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Randstad’s ratio of 13.23x is below its peer average of 19.9x, which indicates the stock is trading at a lower price compared to the Professional Services industry. However, given that Randstad’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Randstad 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. However, with a negative profit growth of -2.8% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Randstad. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although RAND is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to RAND, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on RAND for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
So while earnings quality is important, it's equally important to consider the risks facing Randstad at this point in time. Case in point: We've spotted 1 warning sign for Randstad you should be aware of.
If you are no longer interested in Randstad, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
