Malayan Cement Berhad (KLSE:MCEMENT), is not the largest company out there, but it saw a decent share price growth in the teens level on the KLSE over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine Malayan Cement Berhad’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What Is Malayan Cement Berhad Worth?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Malayan Cement Berhad’s ratio of 26.63x is trading in-line with its industry peers’ ratio, which means if you buy Malayan Cement Berhad today, you’d be paying a relatively reasonable price for it. In addition to this, it seems like Malayan Cement Berhad’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Malayan Cement Berhad?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by a double-digit 15% over the next couple of years, the outlook is positive for Malayan Cement Berhad. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? It seems like the market has already priced in MCEMENT’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 MCEMENT? 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 tabs on MCEMENT, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for MCEMENT, 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.
So while earnings quality is important, it's equally important to consider the risks facing Malayan Cement Berhad at this point in time. You'd be interested to know, that we found 1 warning sign for Malayan Cement Berhad and you'll want to know about this.
If you are no longer interested in Malayan Cement Berhad, 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.
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