While GDB Holdings Berhad (KLSE:GDB) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the KLSE over the last few months. Less-covered, small caps tend to present 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? Let’s take a look at GDB Holdings Berhad’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for GDB Holdings Berhad
What's the opportunity in GDB Holdings Berhad?
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. 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 23.39x is currently trading in-line with its industry peers’ ratio, which means if you buy GDB Holdings Berhad today, you’d be paying a relatively reasonable price for it. 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. 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. 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 financial strength of the company. 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 optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast 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.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 2 warning signs with GDB Holdings Berhad, and understanding these should be part of your investment process.
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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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About KLSE:GDB
GDB Holdings Berhad
An investment holding company, engages in the provision of construction services in Malaysia.
Flawless balance sheet and fair value.
