Is Now An Opportune Moment To Examine MSM Malaysia Holdings Berhad (KLSE:MSM)?

MSM Malaysia Holdings Berhad (KLSE:MSM), is not the largest company out there, but it saw a decent share price growth of 14% on the KLSE over the last few months. 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 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 examine MSM Malaysia Holdings Berhad’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for MSM Malaysia Holdings Berhad

What's The Opportunity In MSM Malaysia Holdings Berhad?

MSM Malaysia Holdings Berhad appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. We’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 52.75x is currently well-above the industry average of 13.71x, meaning that it is trading at a more expensive price relative to its peers. Another thing to keep in mind is that MSM Malaysia Holdings Berhad’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers 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 for it to fall back down into an attractive buying range again.

Can we expect growth from MSM Malaysia Holdings Berhad?

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. MSM Malaysia Holdings Berhad's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger 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 MSM’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe MSM 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 MSM 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 MSM, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about MSM Malaysia Holdings Berhad as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 3 warning signs we've spotted with MSM Malaysia Holdings Berhad (including 1 which doesn't sit too well with us).

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.