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Ritchie Bros. Auctioneers Incorporated (NYSE:RBA), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$64.12 at one point, and dropping to the lows of US$57.66. 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 Ritchie Bros. Auctioneers' current trading price of US$61.92 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 Ritchie Bros. Auctioneers’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Ritchie Bros. Auctioneers worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 18% below my intrinsic value, which means if you buy Ritchie Bros. Auctioneers today, you’d be paying a fair price for it. And if you believe the company’s true value is $75.62, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Ritchie Bros. Auctioneers’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Ritchie Bros. Auctioneers look like?
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. Ritchie Bros. Auctioneers' earnings over the next few years are expected to increase by 56%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? RBA’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on RBA, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. At Simply Wall St, we found 2 warning signs for Ritchie Bros. Auctioneers and we think they deserve your attention.
If you are no longer interested in Ritchie Bros. Auctioneers, 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. 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.
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