Should you buy or sell RPM International stock after outperforming FQ1 estimates?

On Wednesday, RPM International Inc. (NYSE:RPM) shares edged slightly higher after announcing its most recent quarterly results. The company reports its fiscal Q1, 2022 revenue and earnings before markets opened, beating analyst expectations.

RPM posted FQ1 non-GAAP earnings per share of $1.08, beating the consensus Street estimate of $1.02. Moreover, its GAAP EPS of 41.04 also outperformed expectations by $0.01, while revenue for the quarter edged higher by 2.5% Y/Y to $1.65 billion, $20 million ahead of the average for analyst expectations.

RPM looks undervalued

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From a value investor’s viewpoint, RPM shares look competitively valued based on the trailing 12-month P/E ratio of 20.60 and a forward P/E of 17.06. Moreover, analysts expect its earnings per share to grow by 65% this year, before rising at an average annual rate of 15.90% over the next five years.

Therefore, the stock could also gain the attention of long-term growth investors, ahead of its exciting growth story. 

RPM Chairman and CEO Frank C. Sullivan said he expects FQ1 raw material, freight and wage inflation to persist, thereby creating raw material shortages and supply chain challenges.

As such, it would be best to monitor developments before betting on the company’s growth prospects.

Can RPM complete a channel breakout?

Technically, RPM shares appear to be trading within a descending channel formation in the intraday chart. However, the stock has recently bounced back to surge closer to the trendline resistance, creating a breakout opportunity.

Moreover, with shares far from hitting overbought conditions of the 14-day RSI, the current rebound seems poised to continue. As a result, investors could target extended gains at approximately $83.41, or higher at $87.43. On the other hand, $77.01 and $73.73 are crucial support zones.

There is room left to run

In summary, although RPM shares are up 3.45% this month, the stock seems to have more room left to run before reaching overbought conditions.

Therefore, after outperforming expectations in the most recent quarterly results, it could be time to buy the stock ahead of its exciting growth story.

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