Polarcus Limited (OB:PLCS), an energy company based in United Arab Emirates, saw a decent share price growth in the teens level on the OB 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? Let’s examine Polarcus’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. See our latest analysis for Polarcus
What is Polarcus worth?The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that Polarcus’s ratio of 0.6x is trading slightly below its industry peers’ ratio of 1.11x, which means if you buy Polarcus today, you’d be paying a relatively fair price for it. And if you believe that Polarcus should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Polarcus’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Polarcus 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. With profit expected to grow by 99.47% over the next couple of years, the future seems bright for Polarcus. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? PLCS’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 PLCS? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on PLCS, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for PLCS, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Polarcus. You can find everything you need to know about Polarcus in the latest infographic research report. If you are no longer interested in Polarcus, you can use our free platform to see my list of over 50 other stocks with a high growth potential.