Should You Investigate Unisem (M) Berhad (KLSE:UNISEM) At RM2.87?

While Unisem (M) Berhad (KLSE:UNISEM) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the KLSE. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Unisem (M) Berhad’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Unisem (M) Berhad

What's The Opportunity In Unisem (M) Berhad?

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. 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 Unisem (M) Berhad’s ratio of 21.11x is trading slightly below its industry peers’ ratio of 24.5x, which means if you buy Unisem (M) Berhad today, you’d be paying a reasonable price for it. And if you believe that Unisem (M) Berhad should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Is there another opportunity to buy low in the future? Since Unisem (M) Berhad’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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.

What kind of growth will Unisem (M) 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. Unisem (M) Berhad's earnings over the next few years are expected to increase by 33%, 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? UNISEM’s optimistic future growth appears to have been factored into the current share price, 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 UNISEM? 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 UNISEM, 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 UNISEM, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 2 warning signs for Unisem (M) Berhad (of which 1 can't be ignored!) you should know about.

If you are no longer interested in Unisem (M) 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.