Shriro Holdings Limited (ASX:SHM), a consumer durables company based in Australia, received a lot of attention from a substantial price movement on the ASX over the last few months, increasing to A$1.42 at one point, and dropping to the lows of A$1. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Shriro Holdings’s current trading price of A$1 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 Shriro Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Shriro Holdings still cheap?Great news for investors – Shriro Holdings is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is A$1.95, but it is currently trading at AU$1.00 on the share market, meaning that there is still an opportunity to buy now. Shriro Holdings’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
Can we expect growth from Shriro Holdings?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 negative earnings growth of -4.21%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Although SHM is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to SHM, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on SHM for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Shriro Holdings. You can find everything you need to know about Shriro Holdings in the latest infographic research report. If you are no longer interested in Shriro Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.