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Should You Think About Buying Southern Cable Group Berhad (KLSE:SCGBHD) Now?

Southern Cable Group Berhad (KLSE:SCGBHD), is not the largest company out there, but it saw significant share price movement during recent months on the KLSE, rising to highs of RM0.36 and falling to the lows of RM0.29. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Southern Cable Group Berhad's current trading price of RM0.30 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Southern Cable Group Berhad’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Southern Cable Group Berhad

What's The Opportunity In Southern Cable Group Berhad?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 18.71x is currently trading slightly above its industry peers’ ratio of 15.99x, which means if you buy Southern Cable Group Berhad today, you’d be paying a relatively sensible price for it. And if you believe Southern Cable Group Berhad should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since Southern Cable Group Berhad’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Southern Cable Group Berhad generate?

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Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Southern Cable Group Berhad's earnings over the next few years are expected to increase by 76%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in SCGBHD’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 track record of its management team. Have these factors changed since the last time you looked at SCGBHD? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on SCGBHD, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for SCGBHD, 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For instance, we've identified 3 warning signs for Southern Cable Group Berhad (2 are significant) you should be familiar with.

If you are no longer interested in Southern Cable Group Berhad, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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