Is It Time To Consider Buying UWC Berhad (KLSE:UWC)?

UWC Berhad (KLSE:UWC), might not be a large cap stock, but it saw significant share price movement during recent months on the KLSE, rising to highs of RM6.03 and falling to the lows of RM5.09. 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 UWC Berhad's current trading price of RM5.50 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 UWC 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 UWC Berhad

What's the opportunity in UWC Berhad?

UWC Berhad appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. 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 66.79x is currently well-above the industry average of 20.78x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Given that UWC 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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of UWC Berhad look like?

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. With profit expected to grow by 95% over the next couple of years, the future seems bright for UWC 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? UWC’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe UWC should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on UWC for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for UWC, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into UWC Berhad, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 1 warning sign for UWC Berhad you should know about.

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

If you’re looking to trade a wide range of investments, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.