Should You Investigate Kim Loong Resources Berhad (KLSE:KMLOONG) At RM1.53?

While Kim Loong Resources Berhad (KLSE:KMLOONG) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the KLSE. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on Kim Loong Resources Berhad’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Kim Loong Resources Berhad

Is Kim Loong Resources Berhad still cheap?

Great news for investors – Kim Loong Resources 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. 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 15.05x is currently well-below the industry average of 22.36x, meaning that it is trading at a cheaper price relative to its peers. Kim Loong Resources Berhad’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What kind of growth will Kim Loong Resources 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. 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 31% over the next couple of years, the future seems bright for Kim Loong Resources 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? Since KMLOONG is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on KMLOONG for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy KMLOONG. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.

If you want to dive deeper into Kim Loong Resources Berhad, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Kim Loong Resources Berhad, and understanding this should be part of your investment process.

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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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