Stock Analysis

Should You Think About Buying Gadang Holdings Berhad (KLSE:GADANG) Now?

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KLSE:GADANG
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While Gadang Holdings Berhad (KLSE:GADANG) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the KLSE. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on Gadang Holdings Berhad’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Gadang Holdings Berhad

Is Gadang Holdings Berhad still cheap?

Great news for investors – Gadang Holdings Berhad is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 15.71x is currently well-below the industry average of 23.39x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Gadang Holdings Berhad’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Gadang Holdings Berhad?

earnings-and-revenue-growth
KLSE:GADANG Earnings and Revenue Growth December 14th 2020

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. Gadang Holdings Berhad's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since GADANG is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on GADANG for a while, now might be the time to make a leap. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy GADANG. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

If you'd like to know more about Gadang Holdings Berhad as a business, it's important to be aware of any risks it's facing. For instance, we've identified 4 warning signs for Gadang Holdings Berhad (1 doesn't sit too well with us) you should be familiar with.

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