Food Empire Holdings Limited (SGX:F03), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the SGX. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on Food Empire Holdings’s outlook and valuation to see if the opportunity still exists.
Is Food Empire Holdings still cheap?
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. 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 8.78x is currently trading slightly below its industry peers’ ratio of 10.79x, which means if you buy Food Empire Holdings today, you’d be paying a decent price for it. And if you believe Food Empire Holdings should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like Food Empire Holdings’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Food Empire Holdings generate?
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. However, with a relatively muted profit growth of 8.6% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Food Empire Holdings, at least in the short term.
What this means for you:
Are you a shareholder? F03’s future growth appears to have been factored into the current share price, 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 F03? 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 F03, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.
It can be quite valuable to consider what analysts expect for Food Empire Holdings from their most recent forecasts. Luckily, you can check out what analysts are forecasting by clicking here.
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This article by Simply Wall St is general in nature. 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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