Is Now An Opportune Moment To Examine Sarawak Oil Palms Berhad (KLSE:SOP)?

While Sarawak Oil Palms Berhad (KLSE:SOP) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the KLSE over the last few months, increasing to RM4.30 at one point, and dropping to the lows of RM3.69. 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 Sarawak Oil Palms Berhad's current trading price of RM3.85 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 Sarawak Oil Palms 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 Sarawak Oil Palms Berhad

What is Sarawak Oil Palms Berhad worth?

Great news for investors – Sarawak Oil Palms 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 10.37x is currently well-below the industry average of 17x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Sarawak Oil Palms Berhad’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Sarawak Oil Palms 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. Though in the case of Sarawak Oil Palms Berhad, it is expected to deliver a negative earnings growth of -1.9%, 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? Although SOP is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to SOP, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on SOP for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you want to dive deeper into Sarawak Oil Palms Berhad, you'd also look into what risks it is currently facing. To help with this, we've discovered 3 warning signs (1 is potentially serious!) that you ought to be aware of before buying any shares in Sarawak Oil Palms Berhad.

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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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