At RM4.03, Is It Time To Put Sarawak Oil Palms Berhad (KLSE:SOP) On Your Watch List?

Sarawak Oil Palms Berhad (KLSE:SOP), might not be a large cap stock, but it saw a decent share price growth in the teens level on the KLSE over the last few months. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine Sarawak Oil Palms Berhad’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Sarawak Oil Palms Berhad

What's the opportunity in Sarawak Oil Palms Berhad?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 2.9% below my intrinsic value, which means if you buy Sarawak Oil Palms Berhad today, you’d be paying a fair price for it. And if you believe that the stock is really worth MYR4.15, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Sarawak Oil Palms Berhad’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Sarawak Oil Palms 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. Though in the case of Sarawak Oil Palms Berhad, it is expected to deliver a negative earnings growth of -19%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? SOP seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on SOP for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on SOP should the price fluctuate below its true value.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For instance, we've identified 2 warning signs for Sarawak Oil Palms Berhad (1 is significant) you should be familiar with.

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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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