Is It Too Late To Consider Buying Al Khaleej Training and Education Company (TADAWUL:4290)?

Al Khaleej Training and Education Company (TADAWUL:4290), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the SASE. 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? Let’s examine Al Khaleej Training and Education’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Al Khaleej Training and Education

What's the opportunity in Al Khaleej Training and Education?

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 Al Khaleej Training and Education’s ratio of 17.12x is trading slightly below its industry peers’ ratio of 20.51x, which means if you buy Al Khaleej Training and Education today, you’d be paying a decent price for it. And if you believe that Al Khaleej Training and Education 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. Furthermore, Al Khaleej Training and Education’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What does the future of Al Khaleej Training and Education look like?

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. Al Khaleej Training and Education's revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in 4290’s positive outlook, 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 4290? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on 4290, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 4290, 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.

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 - Al Khaleej Training and Education has 2 warning signs we think you should be aware of.

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This article by Simply Wall St is general in nature. 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.
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