Is GDB Holdings Berhad (KLSE:GDB) Potentially Undervalued?

GDB Holdings Berhad (KLSE:GDB), is not the largest company out there, but it saw a double-digit share price rise of over 10% 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 GDB Holdings Berhad’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for GDB Holdings Berhad

Is GDB Holdings Berhad still cheap?

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 GDB Holdings Berhad’s ratio of 20.92x is trading slightly below its industry peers’ ratio of 21.57x, which means if you buy GDB Holdings Berhad today, you’d be paying a decent price for it. And if you believe GDB Holdings 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. Although, there may be an opportunity to buy in the future. This is because GDB Holdings Berhad’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of GDB Holdings 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. 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. GDB 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? GDB’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 GDB? 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 an eye on GDB, 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 GDB, 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.

If you want to dive deeper into GDB Holdings Berhad, you'd also look into what risks it is currently facing. When we did our research, we found 2 warning signs for GDB Holdings Berhad (1 is a bit concerning!) that we believe deserve your full attention.

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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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