A Look At The Fair Value Of Radius Residential Care Limited (NZSE:RAD)

Radius Residential Care Limited (NZSE:RAD) is a New Zealand-based healthcare provider specializing in aged care services for elderly and disabled people. With a market capitalization of NZ$55.53 million, RAD is a small-cap stock that has garnered attention from investors due to its undervalued status and strong growth prospects. This article will explore the fair value of RAD, considering various valuation metrics, peer comparisons, and industry trends.



Valuation Metrics
Radius Residential Care Limited has a Price-to-Sales (PS) ratio of 0.3x, which is significantly lower than the peer average of 4.4x and the Oceanic Healthcare industry average of 1.8x. This suggests that RAD may be undervalued based on its sales relative to its peers and the industry. Additionally, RAD's Enterprise Value/Revenue (EV/Revenue) ratio is 1.5x, which is lower than the industry average of 1.8x, further indicating that RAD may be relatively undervalued compared to its peers in terms of its enterprise value relative to its revenue.

Peer Comparisons
When comparing RAD's PS ratio to its peers, it becomes evident that RAD is trading at a significant discount. The peer average PS ratio is 4.4x, while RAD's PS ratio is 0.3x. This suggests that RAD is trading at a good value compared to its peers. Similarly, when comparing RAD's PS ratio to the Oceanic Healthcare industry average of 1.8x, RAD appears to be undervalued.



Industry Trends
The aged care industry in New Zealand is expected to grow at a CAGR of 3.4% over the next five years, driven by an aging population and increased demand for aged care services. Radius Residential Care Limited is well-positioned to capitalize on this growth, with its extensive network of aged care facilities and strong market presence.

Growth Prospects
Radius Residential Care Limited is forecast to grow its earnings and revenue by 74.2% and 3.4% per annum, respectively. EPS is expected to grow by 72.7% per annum. These growth rates are significantly higher than the industry averages, which are 14.1% for earnings growth and 3.4% for revenue growth. This suggests that RAD may have strong growth prospects, which could contribute to its fair value.

Conclusion
Based on the valuation metrics, peer comparisons, and industry trends discussed in this article, Radius Residential Care Limited (NZSE:RAD) appears to be undervalued. The company's low PS ratio and EV/Revenue ratio, combined with its strong growth prospects and favorable industry trends, suggest that RAD may be an attractive investment opportunity for value-oriented investors. However, it is essential to conduct thorough due diligence and consider the company's risk profile before making any investment decisions.