Is It Time To Consider Buying UMW Holdings Berhad (KLSE:UMW)?

While UMW Holdings Berhad (KLSE:UMW) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the KLSE over the last few months. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on UMW Holdings Berhad’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for UMW Holdings Berhad

What's The Opportunity In UMW Holdings Berhad?

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 UMW Holdings Berhad’s ratio of 10.84x is trading slightly below its industry peers’ ratio of 12.95x, which means if you buy UMW Holdings Berhad today, you’d be paying a decent price for it. And if you believe that UMW Holdings 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. Furthermore, it seems like UMW Holdings Berhad’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from UMW Holdings 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. Though in the case of UMW Holdings Berhad, it is expected to deliver a relatively unexciting earnings growth of 1.0%, 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? It seems like the market has already priced in UMW’s growth outlook, 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 UMW? 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 UMW, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into UMW Holdings Berhad, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 1 warning sign for UMW Holdings Berhad you should know about.

If you are no longer interested in UMW Holdings 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.