Is It Too Late To Consider Buying Pharmaniaga Berhad (KLSE:PHARMA)?

Pharmaniaga Berhad (KLSE:PHARMA), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the KLSE. 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. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Pharmaniaga Berhad’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Pharmaniaga Berhad

What is Pharmaniaga Berhad worth?

Good news, investors! Pharmaniaga Berhad is still a bargain right now according to my price multiple model, which compares 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 6.24x is currently well-below the industry average of 38.82x, meaning that it is trading at a cheaper price relative to its peers. However, given that Pharmaniaga Berhad’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

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

What this means for you:

Are you a shareholder? Although PHARMA 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 PHARMA, 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 PHARMA 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Pharmaniaga Berhad has 3 warning signs we think you should be aware of.

If you are no longer interested in Pharmaniaga 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.