Courts Asia Limited (SGX:RE2), a specialty retail company based in Singapore, received a lot of attention from a substantial price movement on the SGX in the over the last few months, increasing to SGD0.4 at one point, and dropping to the lows of SGD0.32. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether RE2’s current trading price of SGD0.32 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 RE2’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for Courtsia
Is RE2 still cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 10% below my intrinsic value, which means if you buy RE2 today, you’d be paying a reasonable price for it. And if you believe RE2’s true value is SGD0.35, then there’s not much of an upside to gain from mispricing. Furthermore, it seems like RE2’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because RE2’s stock is less volatile than the wider market given its low beta.
What kind of growth will RE2 generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 57.25% over the next couple of years, the future seems bright for RE2. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? RE2’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 RE2? 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 RE2, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for RE2, 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.