At RM0.41, Is It Time To Put HSS Engineers Berhad (KLSE:HSSEB) On Your Watch List?

HSS Engineers Berhad (KLSE:HSSEB), is not the largest company out there, but it received a lot of attention from a substantial price movement on the KLSE over the last few months, increasing to RM0.49 at one point, and dropping to the lows of RM0.38. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether HSS Engineers Berhad's current trading price of RM0.41 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at HSS Engineers Berhad’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for HSS Engineers Berhad

Is HSS Engineers 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. 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 18.75x is currently trading slightly above its industry peers’ ratio of 14.67x, which means if you buy HSS Engineers Berhad today, you’d be paying a relatively reasonable price for it. And if you believe HSS Engineers Berhad should be trading in this range, then there isn’t really any room for the share price 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 HSS Engineers 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 kind of growth will HSS Engineers Berhad generate?

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. HSS Engineers 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? HSSEB’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 HSSEB? 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 HSSEB, 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 HSSEB, which means it’s worth diving deeper into 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. You'd be interested to know, that we found 1 warning sign for HSS Engineers Berhad and you'll want to know about it.

If you are no longer interested in HSS Engineers Berhad, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.