Is There Now An Opportunity In Bawan Company (TADAWUL:1302)?

Bawan Company (TADAWUL:1302), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the SASE over the last few months, increasing to ر.س38.00 at one point, and dropping to the lows of ر.س30.75. 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 Bawan's current trading price of ر.س30.75 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 Bawan’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Bawan

Is Bawan still cheap?

Good news, investors! Bawan 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 Bawan’s ratio of 10.19x is below its peer average of 19.91x, which indicates the stock is trading at a lower price compared to the Building industry. What’s more interesting is that, Bawan’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Bawan 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. However, with a negative profit growth of -15% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for Bawan. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although 1302 is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to 1302, 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 1302 for a while, but hesitant on making the leap, I recommend you research further 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. Be aware that Bawan is showing 3 warning signs in our investment analysis and 2 of those make us uncomfortable...

If you are no longer interested in Bawan, 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.