At RM0.64, Is Malaysian Resources Corporation Berhad (KLSE:MRCB) Worth Looking At Closely?

Malaysian Resources Corporation Berhad (KLSE:MRCB), might not be a large cap stock, but it saw a significant share price rise of 31% in the past couple of months on the KLSE. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. 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? Today we will analyse the most recent data on Malaysian Resources Corporation Berhad’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Malaysian Resources Corporation Berhad

What Is Malaysian Resources Corporation Berhad Worth?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Malaysian Resources Corporation Berhad’s ratio of 20.88x is trading slightly above its industry peers’ ratio of 19.56x, which means if you buy Malaysian Resources Corporation Berhad today, you’d be paying a relatively reasonable price for it. And if you believe Malaysian Resources Corporation 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. Furthermore, Malaysian Resources Corporation 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 Malaysian Resources Corporation Berhad?

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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Malaysian Resources Corporation Berhad, at least in the near future.

What This Means For You

Are you a shareholder? MRCB seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on MRCB, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on MRCB for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on MRCB should the price fluctuate below the industry PE ratio.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 3 warning signs for Malaysian Resources Corporation Berhad (of which 1 is a bit unpleasant!) you should know about.

If you are no longer interested in Malaysian Resources Corporation 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.