Is Now An Opportune Moment To Examine DRB-HICOM Berhad (KLSE:DRBHCOM)?

DRB-HICOM Berhad (KLSE:DRBHCOM), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the KLSE over the last few months, increasing to RM1.57 at one point, and dropping to the lows of RM1.31. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether DRB-HICOM Berhad's current trading price of RM1.44 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 DRB-HICOM Berhad’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for DRB-HICOM Berhad

What's The Opportunity In DRB-HICOM Berhad?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 DRB-HICOM Berhad’s ratio of 15.01x is trading slightly below its industry peers’ ratio of 16.5x, which means if you buy DRB-HICOM Berhad today, you’d be paying a reasonable price for it. And if you believe DRB-HICOM Berhad 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. In addition to this, it seems like DRB-HICOM Berhad’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from DRB-HICOM Berhad?

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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to more than double over the next couple of years, the future seems bright for DRB-HICOM 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? DRBHCOM’s optimistic 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 track record of its management team. Have these factors changed since the last time you looked at DRBHCOM? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on DRBHCOM, 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 DRBHCOM, which means it’s worth diving deeper into 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 DRB-HICOM Berhad, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 1 warning sign for DRB-HICOM Berhad and you'll want to know about this.

If you are no longer interested in DRB-HICOM Berhad, 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.