At RM1.36, Is Bermaz Auto Berhad (KLSE:BAUTO) Worth Looking At Closely?

While Bermaz Auto Berhad (KLSE:BAUTO) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase 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? Today I will analyse the most recent data on Bermaz Auto Berhad’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Bermaz Auto Berhad

Is Bermaz Auto Berhad still cheap?

Bermaz Auto Berhad appears to be overvalued by 30% at the moment, based on my discounted cash flow valuation. The stock is currently priced at RM1.36 on the market compared to my intrinsic value of MYR1.05. This means that the opportunity to buy Bermaz Auto Berhad at a good price has disappeared! Another thing to keep in mind is that Bermaz Auto Berhad’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value 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 to fall back down into an attractive buying range again.

What does the future of Bermaz Auto 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. Bermaz Auto Berhad's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? BAUTO’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe BAUTO should trade below its current price, selling high and buying it back up again when its price falls towards its real value 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 BAUTO for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for BAUTO, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. While conducting our analysis, we found that Bermaz Auto Berhad has 2 warning signs and it would be unwise to ignore 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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