Is There Now An Opportunity In Ricardo plc (LON:RCDO)?

While Ricardo plc (LON:RCDO) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the LSE over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today I will analyse the most recent data on Ricardo’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Ricardo

Is Ricardo still cheap?

Good news, investors! Ricardo is still a bargain right now. My valuation model shows that the intrinsic value for the stock is £5.84, but it is currently trading at UK£4.54 on the share market, meaning that there is still an opportunity to buy now. Another thing to keep in mind is that Ricardo’s share price may be 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 intrinsic value over time, 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.

Can we expect growth from Ricardo?

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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. With revenues expected to grow by a double-digit 18% over the next couple of years, the outlook is positive for Ricardo. If the level of expenses is able to be maintained, 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? Since RCDO is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on RCDO for a while, now might be the time to make a leap. Its buoyant future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy RCDO. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.

If you'd like to know more about Ricardo as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 3 warning signs for Ricardo (of which 1 shouldn't be ignored!) you should know about.

If you are no longer interested in Ricardo, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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. 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.

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