When Should You Buy Elsoft Research Berhad (KLSE:ELSOFT)?

Elsoft Research Berhad (KLSE:ELSOFT), might not be a large cap stock, but it saw significant share price movement during recent months on the KLSE, rising to highs of RM0.64 and falling to the lows of RM0.51. 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 Elsoft Research Berhad's current trading price of RM0.51 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 Elsoft Research Berhad’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Elsoft Research Berhad

Is Elsoft Research Berhad Still Cheap?

Good news, investors! Elsoft Research Berhad is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio 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 Elsoft Research Berhad’s ratio of 7.95x is below its peer average of 28.86x, which indicates the stock is trading at a lower price compared to the Semiconductor industry. Elsoft Research Berhad’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What kind of growth will Elsoft Research 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. 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. Though in the case of Elsoft Research Berhad, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Although ELSOFT is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to ELSOFT, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on ELSOFT for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

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. For example, Elsoft Research Berhad has 4 warning signs (and 2 which are potentially serious) we think you should know about.

If you are no longer interested in Elsoft Research Berhad, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.