Is Now The Time To Look At Buying HeveaBoard Berhad (KLSE:HEVEA)?

HeveaBoard Berhad (KLSE:HEVEA), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the KLSE. 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 take a look at HeveaBoard Berhad’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for HeveaBoard Berhad

What's the opportunity in HeveaBoard Berhad?

HeveaBoard Berhad is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison 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 HeveaBoard Berhad’s ratio of 27.05x is above its peer average of 20.63x, which suggests the stock is trading at a higher price compared to the Forestry industry. Another thing to keep in mind is that HeveaBoard Berhad’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.

What kind of growth will HeveaBoard Berhad generate?

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. HeveaBoard Berhad's earnings over the next few years are expected to increase by 73%, 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 well and truly priced in HEVEA’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe HEVEA 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 tabs on HEVEA for some time, 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 HEVEA, 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 HeveaBoard Berhad, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 3 warning signs for HeveaBoard Berhad and you'll want to know about them.

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This article by Simply Wall St is general in nature. 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.
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