Should You Think About Buying Focus Lumber Berhad (KLSE:FLBHD) Now?

While Focus Lumber Berhad (KLSE:FLBHD) 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 small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Focus Lumber Berhad’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Focus Lumber Berhad

What's the opportunity in Focus Lumber Berhad?

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. 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 10.65x is currently trading slightly below its industry peers’ ratio of 15.35x, which means if you buy Focus Lumber Berhad today, you’d be paying a decent price for it. And if you believe that Focus Lumber Berhad should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. In addition to this, it seems like Focus Lumber 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 Focus Lumber 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. Focus Lumber Berhad's earnings over the next few years are expected to increase by 76%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in FLBHD’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at FLBHD? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on FLBHD, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for FLBHD, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Focus Lumber Berhad as a business, it's important to be aware of any risks it's facing. For example, Focus Lumber Berhad has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

If you are no longer interested in Focus Lumber 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.