Is It Time To Consider Buying LBS Bina Group Berhad (KLSE:LBS)?

LBS Bina Group Berhad (KLSE:LBS), might not be a large cap stock, but it saw a decent share price growth in the teens level on the KLSE over the last few months. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine LBS Bina Group Berhad’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for LBS Bina Group Berhad

What is LBS Bina Group Berhad worth?

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 17.5x is currently trading slightly above its industry peers’ ratio of 16.6x, which means if you buy LBS Bina Group Berhad today, you’d be paying a relatively sensible price for it. And if you believe that LBS Bina Group Berhad should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, LBS Bina Group Berhad’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What kind of growth will LBS Bina Group Berhad generate?

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. With profit expected to grow by 80% over the next couple of years, the future seems bright for LBS Bina Group Berhad. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has already priced in LBS’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 financial strength of the company. Have these factors changed since the last time you looked at LBS? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on LBS, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for LBS, 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.

So while earnings quality is important, it's equally important to consider the risks facing LBS Bina Group Berhad at this point in time. While conducting our analysis, we found that LBS Bina Group Berhad has 1 warning sign and it would be unwise to ignore this.

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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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