The Motley Fool

Why the Reliance Worldwide share price has fallen 26% since May

The Reliance Worldwide Corporation Ltd (ASX: RWC) share price has fallen 26% since the beginning of May. RWC shares currently trade at $3.54 per share, which is a staggering discount of almost 45% when compared to its 52-week high.

When considering recent announcements, it does feel like a decline in the Reliance Worldwide share price was necessary. That being said, at its current price, I think it’s feasible that the market may have overreacted.

Why has the Reliance share price dropped so significantly?

The most recent drop off in share price for Reliance Worldwide comes after the company issued a revised guidance for its 2019 financial results. This announcement, which was released in May, suggested a new range for EBITDA that was $20 million lower than the previous range expected. It’s not surprising that this news prompted a decline in the RWC share price.

Part of the explanation for the reduced earnings was lower than anticipated sales in the United States (US). This came about due to the lack of a ‘modest freeze event’. This type of event is responsible for breaking pipes and is something that Reliance Worldwide, a seller of push-to-connect plumbing fittings, usually benefits from. Shareholders should hope that these unforeseen weather conditions do not become the normal. Reliance Worldwide also noted the downturn in new home construction in Australia and competition in Europe as additional reasons for the reduction in earnings.

In its announcement to the ASX, Reliance Worldwide suggested that the business will be impacted by rising tariffs on imports from China into the US. These increased costs will make the business worse off into the future and the company will need to do what it can to reduce this impact. This news also presented a valid reason for the share price to decline.

Foolish takeaway

I believe that, given the announcements made by Reliance Worldwide, it was inevitable that the share price would fall. However, the current RWC share price appears to reflect quite well the foreseeable challenges that Reliance Worldwide will face. This company has market-leading products and the opportunity to further penetrate a number of large overseas markets. These factors make me believe that Reliance Worldwide shares are well worth considering when making your next investment.

If you're looking for affordable growth shares, here are 5 dirt cheap shares to consider.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

Stock #1 is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Stock #2 is another high-growth business trading near a 52-week low all while offering a 4.7% grossed-up yield...

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

CLICK HERE FOR YOUR FREE REPORT!

Mitchell Perry has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Reliance Worldwide Limited. The Motley Fool Australia has recommended Reliance Worldwide Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

One ASX Stock For An Estimated $US22 Billion Marijuana Market

A little-known ASX company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.

And make no mistake – it is coming. To the tune of an estimated $US22 billion.

Cannabis legalisation is sweeping over North America, and full legalisation arrived in Canada in October 2018.

Here’s the best part: we think there’s one ASX stock that’s uniquely positioned to profit immensely from this explosive new industry… taking savvy investors along for what could be one heck of a ride.

AND, this is the first time The Motley Fool Australia has EVER put a BUY recommendation on a marijuana stock.

Simply click below to learn more on how you can profit from the coming cannabis boom.

Click here to find out more