What Does Keppel Corporation Limited's (SGX:BN4) Share Price Indicate?

While Keppel Corporation Limited (SGX:BN4) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the SGX over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Keppel’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Keppel

Is Keppel still cheap?

Keppel appears to be overvalued by 21% at the moment, based on my discounted cash flow valuation. The stock is currently priced at S$6.86 on the market compared to my intrinsic value of SGD5.66. Not the best news for investors looking to buy! Another thing to keep in mind is that Keppel’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What does the future of Keppel look like?

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. However, with a negative profit growth of -11% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Keppel. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? 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. Given the risk from a negative growth outlook, this could be the right time to reduce your total portfolio risk. 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 tabs on BN4 for some time, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?

So while earnings quality is important, it's equally important to consider the risks facing Keppel at this point in time. When we did our research, we found 4 warning signs for Keppel (2 shouldn't be ignored!) that we believe deserve your full attention.

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.