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While Randstad N.V. (AMS:RAND) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the ENXTAM, rising to highs of €57.74 and falling to the lows of €45.86. 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 Randstad's current trading price of €46.97 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 Randstad’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Randstad
Is Randstad Still Cheap?
Good news, investors! Randstad is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Randstad’s ratio of 9.93x is below its peer average of 19.96x, which indicates the stock is trading at a lower price compared to the Professional Services industry. However, given that Randstad’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Randstad look like?
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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -15% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Randstad. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although RAND is currently trading below the industry PE ratio, the negative profit 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 RAND, or whether diversifying into another stock may be a better move for your total risk and return.