Reliance Worldwide Corp Shares Strong Growth Figures (ASX:RWC)

The Reliance Worldwide Corporation Ltd [ASX:RWC] share price has opened strongly today on the back of a trading update released by the company.

RWC designs, manufactures, and supplies a variety of water flow, control and monitoring products and solutions for the plumbing and heating industry.

Not the sexiest line of products, but certainly crucial to building and renovating.

And that’s been shown in today’s trading update.

At the time of writing, RWC shares are 45 cents higher or 11.78%, trading at $4.27 per share.

ASX RWC Share Price Chart

Source: Tradingview

Does RWC’s first quarter signal COVID-19 bounce back?

RWC’s share price is still at a ~3.65% loss year-on-year.

Though today’s Q1 FY21 results could signal a better year ahead.

Trade across all three of RWC operating regions showed moderate to strong sales growth month-on-month.

With the Australian Pacific region the laggard of the bunch.

Reliance Worldwide Corp Financial Year Results Performance

Source: Reliance Worldwide Corporation

While the results seem positive; they could be a red herring.

RWC said the strong sales growth in the Americas came from improved sales in wholesale channels and continued recovery in the Canadian market. But do not currently expect this elevated level of demand to continue through FY2021 particularly as US government COVID-19 stimulus measures wind down.

Three ‘Deep Value’ Stocks to Watch as the Market Recovers. Discover More.

In APAC, lower housing approvals and new dwelling commencements in Australia continue to weigh no sales growth — and is expected to continue throughout the financial year.

EMEA saw a bumper September after a sluggish start to the financial year.

RWC said it continued to see a recovery in volumes in the UK and Continental Europe, with markets now largely reopened.

Meaning the depleted inventory levels from lockdowns are now able to be replenished.

So, what to make of all of this?

RWC’s CEO Heath Sharp is remaining cautious.

The first quarter of the 2021 financial year has been particularly strong from a sales perspective. Looking ahead, we remain cautious. The US has been boosted by the surge in DIY activity and the return of construction activity to pre-COVID levels, but without further government stimulus measures this growth is likely to slow.

Given the continuing uncertainties in all our markets as a result of COVID-19 we would caution against extrapolating the first quarter’s sales performance for the full year.

Is there value to draw from RWC’s results?

RWC struggled through FY2020.

Despite recording a 5.3% bump in sales, RWC’s net profit tumbled ~33%.

Today’s results could hint a perhaps a better year ahead reflecting on today’s share price action.

If you’re looking for some stocks that have been left undervalued from COVID-19, RWC could be a risky play. If you want to know what to look out for, check out one of our latest reports ‘Three Deep Value Stocks to Consider in a Post-Lockdown World’, these ASX gems could potentially deliver market-beating returns as the economy recovers. Click here to learn more.

Kind regards,

Lachlann Tierney

For Rum Rebellion

 


Lachlann Tierney is a writer for The Rum Rebellion and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. 


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