Why InNature Berhad (KLSE:INNATURE) Could Be Worth Watching

While InNature Berhad (KLSE:INNATURE) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the KLSE over the last few months, increasing to RM0.53 at one point, and dropping to the lows of RM0.35. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether InNature Berhad's current trading price of RM0.35 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at InNature Berhad’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for InNature Berhad

What Is InNature Berhad Worth?

InNature 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 InNature Berhad’s ratio of 15.66x is above its peer average of 11.34x, which suggests the stock is trading at a higher price compared to the Specialty Retail industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since InNature 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.

Can we expect growth from InNature 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. 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. With profit expected to grow by 30% over the next couple of years, the future seems bright for InNature 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 well and truly priced in INNATURE’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 INNATURE 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 INNATURE 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 INNATURE, which means it’s worth diving deeper into other factors 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 InNature Berhad at this point in time. Case in point: We've spotted 2 warning signs for InNature Berhad you should be aware of.

If you are no longer interested in InNature 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.