Is It Time To Consider Buying RADCOM Ltd. (NASDAQ:RDCM)?
While RADCOM Ltd. (NASDAQ:RDCM) might not have the largest market cap around , it saw significant share price movement during recent months on the NASDAQCM, rising to highs of US$10.77 and falling to the lows of US$8.63. 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 RADCOM's current trading price of US$9.36 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 RADCOM’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 RADCOM
Is RADCOM Still Cheap?
According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 37.57x is currently trading slightly below its industry peers’ ratio of 40.67x, which means if you buy RADCOM today, you’d be paying a decent price for it. And if you believe that RADCOM should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, RADCOM’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What does the future of RADCOM 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. In the upcoming year, RADCOM's earnings 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? It seems like the market has already priced in RDCM’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at RDCM? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping an eye on RDCM, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for RDCM, which means it’s worth diving deeper into 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. In terms of investment risks, we've identified 1 warning sign with RADCOM, and understanding this should be part of your investment process.
If you are no longer interested in RADCOM, 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com