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

Keppel Corporation Limited (SGX:BN4), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the SGX over the last few months, increasing to S$7.52 at one point, and dropping to the lows of S$6.39. 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 Keppel's current trading price of S$6.95 reflective of the actual 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.

Check out our latest analysis for Keppel

Is Keppel Still Cheap?

According to my valuation model, the stock is currently overvalued by about 34%, trading at S$6.95 compared to my intrinsic value of SGD5.17. This means that the opportunity to buy Keppel at a good price has disappeared! In addition to this, it seems like Keppel’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, 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.

Can we expect growth from Keppel?

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 -16% 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 is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the uncertainty from negative growth in the future, 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, Keppel has 4 warning signs (and 2 which make us uncomfortable) we think you should know about.

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.