Is MSM Malaysia Holdings Berhad (KLSE:MSM) Potentially Undervalued?

MSM Malaysia Holdings Berhad (KLSE:MSM), is not the largest company out there, but it received a lot of attention from a substantial price movement on the KLSE over the last few months, increasing to RM1.57 at one point, and dropping to the lows of RM0.89. 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 MSM Malaysia Holdings Berhad's current trading price of RM0.89 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 MSM Malaysia Holdings Berhad’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for MSM Malaysia Holdings Berhad

What's the opportunity in MSM Malaysia Holdings Berhad?

Good news, investors! MSM Malaysia Holdings Berhad is still a bargain right now according to my price multiple model, which compares 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 5.69x is currently well-below the industry average of 16.25x, meaning that it is trading at a cheaper price relative to its peers. However, given that MSM Malaysia 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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from MSM Malaysia Holdings Berhad?

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. However, with a relatively muted profit growth of 9.8% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for MSM Malaysia Holdings Berhad, at least in the short term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since MSM is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

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

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For instance, we've identified 2 warning signs for MSM Malaysia Holdings Berhad (1 is a bit concerning) you should be familiar with.

If you are no longer interested in MSM Malaysia Holdings 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.