Is Supermax Corporation Berhad (KLSE:SUPERMX) Potentially Undervalued?

Supermax Corporation Berhad (KLSE:SUPERMX), is not the largest company out there, but it received a lot of attention from a substantial price movement on the KLSE over the last few months, increasing to RM1.30 at one point, and dropping to the lows of RM0.99. 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 Supermax Corporation Berhad's current trading price of RM1.03 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 Supermax Corporation 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 Supermax Corporation Berhad

What's the opportunity in Supermax Corporation Berhad?

According to my valuation model, Supermax Corporation Berhad seems to be fairly priced at around 13% below my intrinsic value, which means if you buy Supermax Corporation Berhad today, you’d be paying a reasonable price for it. And if you believe the company’s true value is MYR1.18, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, Supermax Corporation Berhad’s low beta implies that the stock is less volatile than the wider market.

What does the future of Supermax Corporation Berhad look like?

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 Supermax Corporation Berhad, it is expected to deliver a highly negative earnings growth in the next few years, 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? SUPERMX 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 SUPERMX for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which 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 SUPERMX should the price fluctuate below its true value.

So while earnings quality is important, it's equally important to consider the risks facing Supermax Corporation Berhad at this point in time. For instance, we've identified 3 warning signs for Supermax Corporation Berhad (1 is a bit unpleasant) you should be familiar with.

If you are no longer interested in Supermax Corporation Berhad, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.