Stock Analysis

Is Now The Time To Look At Buying Gamuda Berhad (KLSE:GAMUDA)?

KLSE:GAMUDA
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Gamuda Berhad (KLSE:GAMUDA), is not the largest company out there, but 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. But what if there is still an opportunity to buy? Let’s examine Gamuda Berhad’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Gamuda Berhad

Is Gamuda Berhad still cheap?

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 Gamuda Berhad’s ratio of 21.43x is trading slightly above its industry peers’ ratio of 18.67x, which means if you buy Gamuda Berhad today, you’d be paying a relatively sensible price for it. And if you believe that Gamuda Berhad should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, Gamuda Berhad’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

Can we expect growth from Gamuda Berhad?

earnings-and-revenue-growth
KLSE:GAMUDA Earnings and Revenue Growth September 14th 2021

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. With profit expected to grow by 82% over the next couple of years, the future seems bright for Gamuda 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? GAMUDA’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 financial strength of the company. Have these factors changed since the last time you looked at GAMUDA? 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 GAMUDA, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for GAMUDA, 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.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. At Simply Wall St, we found 2 warning signs for Gamuda Berhad and we think they deserve your attention.

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Valuation is complex, but we're helping make it simple.

Find out whether Gamuda Berhad is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.
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