Is Now The Time To Look At Buying United U-LI Corporation Berhad (KLSE:ULICORP)?

While United U-LI Corporation Berhad (KLSE:ULICORP) might not be the most widely known stock at the moment, 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 United U-LI Corporation Berhad’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for United U-LI Corporation Berhad

What's The Opportunity In United U-LI Corporation 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 United U-LI Corporation Berhad’s ratio of 7.29x is trading slightly below its industry peers’ ratio of 10.51x, which means if you buy United U-LI Corporation Berhad today, you’d be paying a decent price for it. And if you believe that United U-LI Corporation 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. Although, there may be an opportunity to buy in the future. This is because United U-LI Corporation 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.

What kind of growth will United U-LI Corporation Berhad generate?

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. However, with a negative profit growth of -14% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for United U-LI Corporation Berhad. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? ULICORP seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on ULICORP, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on ULICORP for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on ULICORP should the price fluctuate below the industry PE ratio.

So while earnings quality is important, it's equally important to consider the risks facing United U-LI Corporation Berhad at this point in time. Every company has risks, and we've spotted 3 warning signs for United U-LI Corporation Berhad you should know about.

If you are no longer interested in United U-LI Corporation Berhad, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.