by NRW Holdings Limited (ASX:NWH) is not the biggest company out there, but it has gained a lot of attention in recent months due to a substantial price move on the ASX, rising as high as AU$2.96 at one point and falling to the lows of AU $2.10. Some stock price movements can give investors a better chance of getting into the stock and possibly buying at a lower price. One question to answer is whether NRW Holdings’ current trading price of AU$2.21 reflects the true value of the small cap? Or is it currently undervalued, giving us the opportunity to buy? Let’s take a look at the outlook and value of NRW Holdings based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for NRW Holdings
What is the opportunity in NRW Holdings?
The stock price seems reasonable right now on my price multiple model, which compares the company’s price-to-earnings ratio to the industry average. In this case, I used the price-to-earnings (PE) ratio, as there is not enough information to reliably predict the stock’s cash flows. I feel that NRW Holdings’ ratio of 11.32x trades slightly below the 15.25x ratio of its peers, meaning if you buy NRW Holdings today, you’re paying a reasonable price for it. And if you believe that NRW Holdings should trade in this range, then there is not much room for the share price to rise above the level of other peers in the long run. Will there be an opportunity to buy low in the future? Since NRW Holdings’ share price is quite volatile, we could potentially see it fall lower (or higher) in the future, giving us another buying opportunity. This is based on the high beta, which is a good indicator of how much the stock is moving relative to the rest of the market.
Can we expect growth from NRW Holdings?
Future prospects are an important aspect when considering buying a stock, especially if you are an investor looking to grow your portfolio. While value investors would argue that it is intrinsic value relative to price that matters most, a more compelling investment thesis would be high growth potential at a cheap price. With an expected profit growth of 36% in the coming years, the future looks bright for NRW Holdings. It appears that higher cash flow is on the way for the stock, which should lead to a higher share valuation.
What this means for you
Are you a shareholder? It appears the market has already priced in NWH’s positive outlook, with stocks trading around industry price multiples. However, there are also other important factors that we have not considered today, such as the track record of the management team. Have these factors changed since the last time you watched NWH? Do you have enough conviction to buy if the price fluctuates below the industry’s PE ratio?
Are you a potential investor? If you’ve been eyeing NWH, it may not be the most optimal time to buy as it trades around industry price multiples. However, the positive outlook is encouraging for NWH, meaning it’s worth delving deeper into other factors, such as balance sheet strength, to capitalize on the next price drop.
So if you want to dive deeper into this stock, it’s critical to consider the risks it faces. To that end, you need to learn about the 2 warning signs we’ve spotted NRW Holdings (including 1 we’re a little uncomfortable with).
If you are no longer interested in NRW Holdings, you can use our free platform to view our list of over 50 other stocks with high growth potential.
Do you have feedback on this article? Concerned about the content? Get in touch directly with us. You can also email the editorial team at (at) simplewallst.com.
This Simply Wall St article is general in nature. We only comment based on historical data and analyst forecasts using an unbiased methodology and our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or your financial situation. We aim to provide you with long-term focused analytics driven by fundamental data. Please note that our analysis may not take into account the latest price sensitive company announcements or quality material. Simply Wall St has no exposure to the listed stocks.
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