Retail Food Group Limited (ASX:RFG) may not have the largest market capitalisation, but it has seen a decent 13% share price increase on the ASX over the past few months. Shareholders may appreciate the recent jump in share price, but the company still has a long way to go before it hits its yearly highs again. As a stock with high analyst coverage, one might assume that any recent changes in the company’s outlook are already priced into the price. However, could the stock still be trading at a relatively cheap price? Let’s examine Retail Food Group’s valuation and outlook in more detail to see if there is still a bargain opportunity.
Check out our latest analysis for Retail Food Group
What is the Retail Food Group worth?
According to our price multiple model, which compares the company’s price-to-earnings ratio to the industry average, the share price seems justified. We’ve used the price-to-earnings ratio in this case because there isn’t enough transparency to predict cash flows. The stock’s ratio of 30.05x is currently slightly higher than its industry peers’ ratio of 25.27x, meaning that if you buy Retail Food Group today, you’d be paying a relatively reasonable price for it. And if you believe Retail Food Group should trade in this range, then there’s no real scope for the price to rise above the levels of other industry peers in the long term. So, is there another chance to buy cheap in the future? Given that Retail Food Group’s stock is quite volatile (i.e. its price movements are larger relative to the rest of the market), this could mean that the price can fall even further, giving us an opportunity to buy later. This is based on their high beta, which is a good indicator of the volatility of the share price.
What does the future hold for the Retail Food Group?
Future prospects are an important consideration when you’re looking to buy a stock, especially if you’re an investor looking for growth in their portfolio. Buying a great company with solid prospects at a cheap price is always a good investment. So let’s also take a look at the company’s future expectations. With earnings expected to more than double in the next few years, the future looks bright for Retail Food Group. It looks like higher cash flow is on the cards for the stock, which should lead to a higher share valuation.
What this means for you
Are you a shareholder? It seems like the market has already priced in RFG’s positive outlook, with shares trading around industry price multiples. However, there are other important factors we haven’t considered today, such as the company’s financial strength. Have these factors changed since you last looked at RFG? Will you have enough confidence to invest in the company if the price falls below the industry P/E?
Are you a potential investor? If you’ve been keeping an eye on RFG, now may not be the best time to buy as the stock is trading around industry price multiples. However, the bullish forecast is encouraging for RFG, meaning it’s worth diving deeper into other factors such as balance sheet strength to take advantage of the next price dip.
Remember that when analyzing a stock, it is important to consider the risks associated with it. A typical example: We have 1 warning sign for Retail Food Group You should be aware.
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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.
