When Should You Buy Pecca Group Berhad (KLSE:PECCA)?

Pecca Group Berhad (KLSE:PECCA), which is in the auto components business, and is based in Malaysia, saw a double-digit share price rise of over 10% in the past couple of months on the KLSE. 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, what if the stock is still a bargain? Let’s examine Pecca Group Berhad’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Pecca Group Berhad

What is Pecca Group 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 Pecca Group Berhad’s ratio of 13.3x is trading slightly below its industry peers’ ratio of 17.79x, which means if you buy Pecca Group Berhad today, you’d be paying a reasonable price for it. And if you believe that Pecca Group Berhad should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because Pecca Group Berhad’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Pecca Group Berhad?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 32% over the next couple of years, the future seems bright for Pecca Group 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 PECCA’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 PECCA? 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 PECCA, 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 PECCA, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Pecca Group Berhad. You can find everything you need to know about Pecca Group Berhad in the latest infographic research report. If you are no longer interested in Pecca Group Berhad, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you’re looking to trade Pecca Group Berhad, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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