At S$0.84, Is Frencken Group Limited (SGX:E28) Worth Looking At Closely?

While Frencken Group Limited (SGX:E28) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the SGX, rising to highs of S$1.31 and falling to the lows of S$0.84. 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 Frencken Group's current trading price of S$0.84 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 Frencken Group’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 Frencken Group

Is Frencken Group Still Cheap?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 6.7x is currently trading slightly below its industry peers’ ratio of 8.26x, which means if you buy Frencken Group today, you’d be paying a decent price for it. And if you believe that Frencken Group 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. So, is there another chance to buy low in the future? Given that Frencken Group’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Frencken Group?

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. With profit expected to grow by a double-digit 18% over the next couple of years, the outlook is positive for Frencken Group. 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? It seems like the market has already priced in E28’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 track record of its management team. Have these factors changed since the last time you looked at E28? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on E28, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for E28, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Frencken Group, you'd also look into what risks it is currently facing. For example - Frencken Group has 1 warning sign we think you should be aware of.

If you are no longer interested in Frencken Group, 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.