Is It Too Late To Consider Buying RCM Technologies, Inc. (NASDAQ:RCMT)?
While RCM Technologies, Inc. (NASDAQ:RCMT) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the NASDAQGM over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at RCM Technologies’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Check out our latest analysis for RCM Technologies
What's The Opportunity In RCM Technologies?
Good news, investors! RCM Technologies 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 RCM Technologies’s ratio of 7.97x is below its peer average of 16.68x, which indicates the stock is trading at a lower price compared to the Professional Services industry. Another thing to keep in mind is that RCM Technologies’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 kind of growth will RCM Technologies 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 relatively muted profit growth of 4.2% expected over the next year, growth doesn’t seem like a key driver for a buy decision for RCM Technologies, at least in the short term.
What This Means For You
Are you a shareholder? Even though growth is relatively muted, since RCMT is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on RCMT for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy RCMT. 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.
If you want to dive deeper into RCM Technologies, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 2 warning signs for RCM Technologies (of which 1 shouldn't be ignored!) you should know about.
If you are no longer interested in RCM Technologies, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
