Is Now An Opportune Moment To Examine REDtone Digital Berhad (KLSE:REDTONE)?

While REDtone Digital Berhad (KLSE:REDTONE) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the KLSE over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on REDtone Digital Berhad’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for REDtone Digital Berhad

Is REDtone Digital Berhad still cheap?

Great news for investors – REDtone Digital Berhad is still trading at a fairly cheap price 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 REDtone Digital Berhad’s ratio of 12.81x is below its peer average of 19.23x, which indicates the stock is trading at a lower price compared to the Telecom industry. However, given that REDtone Digital Berhad’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from REDtone Digital Berhad?

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. However, with a relatively muted profit growth of 6.8% expected over the next year, growth doesn’t seem like a key driver for a buy decision for REDtone Digital Berhad, at least in the short term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since REDTONE is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on REDTONE for a while, now might be the time to enter the stock. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy REDTONE. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

If you'd like to know more about REDtone Digital Berhad as a business, it's important to be aware of any risks it's facing. For example - REDtone Digital Berhad has 3 warning signs we think you should be aware of.

If you are no longer interested in REDtone Digital 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.