Should You Investigate Karex Berhad (KLSE:KAREX) At RM0.81?

Karex Berhad (KLSE:KAREX), might not be a large cap stock, but it saw a significant share price rise of 42% in the past couple of months on the KLSE. The recent share price gains has brought the company back closer to its yearly peak. 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? Today we will analyse the most recent data on Karex Berhad’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Karex Berhad

What Is Karex Berhad Worth?

Karex Berhad is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Karex Berhad’s ratio of 63.49x is above its peer average of 25.89x, which suggests the stock is trading at a higher price compared to the Personal Products industry. But, is there another opportunity to buy low in the future? Since Karex Berhad’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 does the future of Karex Berhad look like?

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. In Karex Berhad's case, its revenues are expected to grow by 36% over the next year, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? KAREX’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe KAREX should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on KAREX for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for KAREX, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Karex Berhad, you'd also look into what risks it is currently facing. For example - Karex Berhad has 1 warning sign we think you should be aware of.

If you are no longer interested in Karex 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.