Should You Investigate TH Plantations Berhad (KLSE:THPLANT) At RM0.59?

TH Plantations Berhad (KLSE:THPLANT), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the KLSE. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine TH Plantations Berhad’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for TH Plantations Berhad

Is TH Plantations Berhad Still Cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that TH Plantations Berhad’s ratio of 11.56x is trading slightly below its industry peers’ ratio of 11.81x, which means if you buy TH Plantations Berhad today, you’d be paying a reasonable price for it. And if you believe TH Plantations Berhad should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. In addition to this, it seems like TH Plantations Berhad’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from TH Plantations 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 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 TH Plantations Berhad, at least in the near future.

What This Means For You

Are you a shareholder? Currently, THPLANT appears to be trading around industry price multiples, 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 beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on THPLANT, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on THPLANT for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, 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 THPLANT should the price fluctuate below the industry PE ratio.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, TH Plantations Berhad has 5 warning signs (and 2 which are significant) we think you should know about.

If you are no longer interested in TH Plantations 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.