What Does Sarawak Oil Palms Berhad's (KLSE:SOP) Share Price Indicate?

While Sarawak Oil Palms Berhad (KLSE:SOP) might not be the most widely known stock at the moment, it led the KLSE gainers with a relatively large price hike in the past couple of weeks. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today I will analyse the most recent data on Sarawak Oil Palms Berhad’s outlook and valuation to see if the opportunity still exists.

View 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 7.56x is currently well-below the industry average of 14.3x, 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.

What kind of growth will Sarawak Oil Palms Berhad generate?

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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Sarawak Oil Palms Berhad, at least in the near future.

What this means for you:

Are you a shareholder? Although SOP is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher 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 tabs on SOP for some time, but hesitant on making the leap, I recommend you dig deeper 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've found that Sarawak Oil Palms Berhad has 2 warning signs (1 doesn't sit too well with us!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Sarawak Oil Palms 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.