Is Now An Opportune Moment To Examine Richelieu Hardware Ltd. (TSE:RCH)?

Richelieu Hardware Ltd. (TSE:RCH), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the TSX over the last few months, increasing to CA$51.06 at one point, and dropping to the lows of CA$32.97. 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 Richelieu Hardware's current trading price of CA$34.04 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Richelieu Hardware’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Richelieu Hardware

What is Richelieu Hardware worth?

Good news, investors! Richelieu Hardware is still a bargain right now. My valuation model shows that the intrinsic value for the stock is CA$43.77, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Although, there may be another chance to buy again in the future. This is because Richelieu Hardware’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Richelieu Hardware?

earnings-and-revenue-growth

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. However, with a negative profit growth of -6.2% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Richelieu Hardware. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although RCH is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to RCH, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on RCH for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So while earnings quality is important, it's equally important to consider the risks facing Richelieu Hardware at this point in time. To that end, you should learn about the 2 warning signs we've spotted with Richelieu Hardware (including 1 which can't be ignored).

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

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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.