At S$5.31, Is It Time To Put Keppel Corporation Limited (SGX:BN4) On Your Watch List?

Keppel Corporation Limited (SGX:BN4), is not the largest company out there, but it saw its share price hover around a small range of S$5.04 to S$5.53 over the last few weeks. But is this actually reflective of the share value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Keppel’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Keppel

What's the opportunity in Keppel?

The stock is currently trading at S$5.31 on the share market, which means it is overvalued by 30% compared to my intrinsic value of SGD4.07. This means that the buying opportunity has probably disappeared for now. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Keppel’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.

What kind of growth will Keppel generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 more than double over the next couple of years, the future seems bright for Keppel. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? BN4’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe BN4 should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on BN4 for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for BN4, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Keppel at this point in time. For instance, we've identified 3 warning signs for Keppel (1 is a bit concerning) you should be familiar with.

If you are no longer interested in Keppel, 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.