What Does P.I.E. Industrial Berhad's (KLSE:PIE) Share Price Indicate?

P.I.E. Industrial Berhad (KLSE:PIE), 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 RM3.87 at one point, and dropping to the lows of RM2.35. 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 P.I.E. Industrial Berhad's current trading price of RM2.35 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 P.I.E. Industrial 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 P.I.E. Industrial Berhad

What's the opportunity in P.I.E. Industrial Berhad?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 P.I.E. Industrial Berhad’s ratio of 14.87x is trading slightly below its industry peers’ ratio of 18.78x, which means if you buy P.I.E. Industrial Berhad today, you’d be paying a decent price for it. And if you believe P.I.E. Industrial Berhad should be trading in this range, then there isn’t much room for the share price to 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 P.I.E. Industrial 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.

Can we expect growth from P.I.E. Industrial 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 32% over the next couple of years, the future seems bright for P.I.E. Industrial 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 PIE’s positive outlook, with shares trading around industry price multiples. 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 PIE? 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 an eye on PIE, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for PIE, 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.

So while earnings quality is important, it's equally important to consider the risks facing P.I.E. Industrial Berhad at this point in time. When we did our research, we found 3 warning signs for P.I.E. Industrial Berhad (1 shouldn't be ignored!) that we believe deserve your full attention.

If you are no longer interested in P.I.E. Industrial Berhad, 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.