Is There Now An Opportunity In Superlon Holdings Berhad (KLSE:SUPERLN)?

While Superlon Holdings Berhad (KLSE:SUPERLN) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase 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 Superlon 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 Superlon Holdings Berhad

Is Superlon Holdings Berhad still cheap?

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. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 15.98x is currently trading slightly below its industry peers’ ratio of 18.87x, which means if you buy Superlon Holdings Berhad today, you’d be paying a reasonable price for it. And if you believe that Superlon Holdings Berhad should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. So, is there another chance to buy low in the future? Given that Superlon Holdings Berhad’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Superlon Holdings Berhad generate?

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 a relatively muted profit growth of 7.7% expected over the next year, growth doesn’t seem like a key driver for a buy decision for Superlon Holdings Berhad, at least in the short term.

What this means for you:

Are you a shareholder? SUPERLN’s future growth appears to have been factored into the current share price, 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 SUPERLN? 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 tabs on SUPERLN, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors 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. At Simply Wall St, we found 3 warning signs for Superlon Holdings Berhad and we think they deserve your attention.

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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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