Why EITA Resources Berhad (KLSE:EITA) Could Be Worth Watching

EITA Resources Berhad (KLSE:EITA), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the KLSE over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at EITA Resources Berhad’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for EITA Resources Berhad

Is EITA Resources Berhad still cheap?

According to my valuation model, EITA Resources Berhad seems to be fairly priced at around 15% below my intrinsic value, which means if you buy EITA Resources Berhad today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth MYR2.22, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, EITA Resources Berhad’s low beta implies that the stock is less volatile than the wider market.

What does the future of EITA Resources Berhad 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. EITA Resources Berhad's earnings over the next few years are expected to increase by 65%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in EITA’s positive outlook, with shares trading around its fair value. 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 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 EITA, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - EITA Resources Berhad has 3 warning signs we think you should be aware of.

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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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