Is It Too Late To Consider Buying Muhibbah Engineering (M) Bhd. (KLSE:MUHIBAH)?

Muhibbah Engineering (M) Bhd. (KLSE:MUHIBAH), might not be a large cap stock, but it saw a decent share price growth of 19% on the KLSE over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. 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 Muhibbah Engineering (M) Bhd’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Muhibbah Engineering (M) Bhd

Is Muhibbah Engineering (M) Bhd Still Cheap?

Muhibbah Engineering (M) Bhd is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison 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 Muhibbah Engineering (M) Bhd’s ratio of 31.99x is above its peer average of 20.21x, which suggests the stock is trading at a higher price compared to the Construction industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Muhibbah Engineering (M) Bhd’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.

Can we expect growth from Muhibbah Engineering (M) Bhd?

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. With profit expected to more than double over the next couple of years, the future seems bright for Muhibbah Engineering (M) Bhd. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in MUHIBAH’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe MUHIBAH should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on MUHIBAH for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for MUHIBAH, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Diving deeper into the forecasts for Muhibbah Engineering (M) Bhd mentioned earlier will help you understand how analysts view the stock going forward. At Simply Wall St, we have the analysts estimates which you can view by clicking here.

If you are no longer interested in Muhibbah Engineering (M) Bhd, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.