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At US$154, Is RBC Bearings Incorporated (NASDAQ:ROLL) Worth Looking At Closely?

Simply Wall St

RBC Bearings Incorporated (NASDAQ:ROLL), which is in the machinery business, and is based in United States, received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$175 at one point, and dropping to the lows of US$154. 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 RBC Bearings's current trading price of US$154 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at RBC Bearings’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 RBC Bearings

What is RBC Bearings worth?

RBC Bearings appears to be overvalued according to my relative valuation model. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 34.42x is currently well-above the industry average of 21.81x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since RBC Bearings’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from RBC Bearings?

NasdaqGS:ROLL Past and Future Earnings, February 4th 2020

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 24% over the next year, the near-term future seems bright for RBC Bearings. 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? It seems like the market has well and truly priced in ROLL’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe ROLL should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on ROLL for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for ROLL, which means it’s worth diving deeper into other factors 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 RBC Bearings. You can find everything you need to know about RBC Bearings in the latest infographic research report. If you are no longer interested in RBC Bearings, 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 editorial-team@simplywallst.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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.