What Does JAKS Resources Berhad's (KLSE:JAKS) Share Price Indicate?

While JAKS Resources Berhad (KLSE:JAKS) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the KLSE over the last few months. 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? Let’s examine JAKS Resources Berhad’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for JAKS Resources Berhad

What's The Opportunity In JAKS Resources Berhad?

Great news for investors – JAKS Resources 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. 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 JAKS Resources Berhad’s ratio of 8.21x is below its peer average of 16.79x, which indicates the stock is trading at a lower price compared to the Construction industry. However, given that JAKS Resources Berhad’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will JAKS Resources Berhad generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of JAKS Resources Berhad, it is expected to deliver a negative earnings growth of -14%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Although JAKS is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to JAKS, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on JAKS for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you want to dive deeper into JAKS Resources Berhad, you'd also look into what risks it is currently facing. For example, we've found that JAKS Resources Berhad has 3 warning signs (1 makes us a bit uncomfortable!) that deserve your attention before going any further with your analysis.

If you are no longer interested in JAKS Resources 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.