Is It Time To Consider Buying Richardson Electronics, Ltd. (NASDAQ:RELL)?
Richardson Electronics, Ltd. (NASDAQ:RELL), might not be a large cap stock, but it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$14.11 and falling to the lows of US$10.12. 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 Richardson Electronics' current trading price of US$10.12 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 Richardson Electronics’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 Richardson Electronics
What's The Opportunity In Richardson Electronics?
Great news for investors – Richardson Electronics is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. we find that Richardson Electronics’s ratio of 14.61x is below its peer average of 19.67x, which indicates the stock is trading at a lower price compared to the Electronic industry. Another thing to keep in mind is that Richardson Electronics’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What does the future of Richardson Electronics look like?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Richardson Electronics, at least in the near future.
What This Means For You
Are you a shareholder? Although RELL is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. We recommend you think about whether you want to increase your portfolio exposure to RELL, 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 RELL for some time, but hesitant on making the leap, we 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.
If you want to dive deeper into Richardson Electronics, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 2 warning signs for Richardson Electronics and you'll want to know about these.
If you are no longer interested in Richardson Electronics, 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.
