Should You Think About Buying Samsung E&A Co., Ltd. (KRX:028050) Now?

Samsung E&A Co., Ltd. (KRX:028050), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the KOSE over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. As a mid-cap 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 Samsung E&A’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Samsung E&A

What's The Opportunity In Samsung E&A?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Samsung E&A’s ratio of 7.44x is trading slightly below its industry peers’ ratio of 9.13x, which means if you buy Samsung E&A today, you’d be paying a decent price for it. And if you believe Samsung E&A 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. So, is there another chance to buy low in the future? Given that Samsung E&A’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Samsung E&A generate?

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. However, with a negative profit growth of -1.2% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Samsung E&A. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Currently, A028050 appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on A028050, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on A028050 for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on A028050 should the price fluctuate below the industry PE ratio.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 1 warning sign for Samsung E&A you should be aware of.

If you are no longer interested in Samsung E&A, 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. 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.