Is It Too Late To Consider Buying Samchem Holdings Berhad (KLSE:SAMCHEM)?

Samchem Holdings Berhad (KLSE:SAMCHEM), is not the largest company out there, but it saw a decent share price growth in the teens level on the KLSE over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Samchem Holdings Berhad’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Samchem Holdings Berhad

What is Samchem Holdings Berhad worth?

Great news for investors – Samchem Holdings 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 Samchem Holdings Berhad’s ratio of 10.71x is below its peer average of 16.69x, which indicates the stock is trading at a lower price compared to the Trade Distributors industry. Although, there may be another chance to buy again in the future. This is because Samchem Holdings 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 Samchem Holdings 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. 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. However, with a negative profit growth of -8.4% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Samchem Holdings Berhad. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although SAMCHEM 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 SAMCHEM, 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 SAMCHEM 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 3 warning signs that you should run your eye over to get a better picture of Samchem Holdings Berhad.

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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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