Shriro Holdings Limited (ASX:SHM), might not be a large cap stock, but it saw a decent share price growth in the teens level on the ASX over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Shriro Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for Shriro Holdings
What is Shriro Holdings worth?
According to my valuation model, Shriro Holdings seems to be fairly priced at around 12% below my intrinsic value, which means if you buy Shriro Holdings today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth A$0.57, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Shriro Holdings’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.
What does the future of Shriro Holdings look like?
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. Though in the case of Shriro Holdings, it is expected to deliver a relatively unexciting earnings growth of 6.4%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? SHM’s future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on SHM, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook 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.
If you want to dive deeper into Shriro Holdings, you'd also look into what risks it is currently facing. Case in point: We've spotted 2 warning signs for Shriro Holdings you should be aware of.
If you are no longer interested in Shriro Holdings, 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. 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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About ASX:SHM
Shriro Holdings
Manufactures, markets, and distributes consumer products in Australia, New Zealand, and internationally.
Flawless balance sheet, good value and pays a dividend.
