When Should You Buy Frontken Corporation Berhad (KLSE:FRONTKN)?

Frontken Corporation Berhad (KLSE:FRONTKN), is not the largest company out there, but it led the KLSE gainers with a relatively large price hike in the past couple of weeks. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at Frontken Corporation Berhad’s outlook and value based on the most recent financial data to see if the opportunity still exists.

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Is Frontken Corporation Berhad Still Cheap?

According to our valuation model, the stock is currently overvalued by about 22%, trading at RM3.47 compared to our intrinsic value of MYR2.85. This means that the opportunity to buy Frontken Corporation Berhad at a good price has disappeared! Another thing to keep in mind is that Frontken Corporation Berhad’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

Check out our latest analysis for Frontken Corporation Berhad

What kind of growth will Frontken Corporation 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. Frontken Corporation Berhad's earnings over the next few years are expected to increase by 54%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in FRONTKN’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe FRONTKN should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 tabs on FRONTKN for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for FRONTKN, which means it’s worth diving deeper into other factors 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 Frontken Corporation Berhad at this point in time. Every company has risks, and we've spotted 1 warning sign for Frontken Corporation Berhad you should know about.

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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.