Pentamaster Corporation Berhad (KLSE:PENTA), is not the largest company out there, but it saw significant share price movement during recent months on the KLSE, rising to highs of RM6.20 and falling to the lows of RM4.55. 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 Pentamaster Corporation Berhad's current trading price of RM4.59 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 Pentamaster Corporation Berhad’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Pentamaster Corporation Berhad still cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 2.8% below my intrinsic value, which means if you buy Pentamaster Corporation Berhad today, you’d be paying a reasonable price for it. And if you believe the company’s true value is MYR4.72, then there’s not much of an upside to gain from mispricing. Furthermore, Pentamaster Corporation Berhad’s low beta implies that the stock is less volatile than the wider market.
Can we expect growth from Pentamaster Corporation Berhad?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 97% over the next couple of years, the future seems bright for Pentamaster Corporation Berhad. 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 already priced in PENTA’s positive outlook, with shares trading around its fair value. 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 the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on PENTA, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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. While conducting our analysis, we found that Pentamaster Corporation Berhad has 1 warning sign and it would be unwise to ignore it.
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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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