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Fu Yu Corporation Limited (SGX:F13), which is in the machinery business, and is based in Singapore, saw significant share price movement during recent months on the SGX, rising to highs of SGD0.22 and falling to the lows of SGD0.20. 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 Fu Yu’s current trading price of SGD0.21 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 Fu Yu’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Fu Yu still cheap?
The stock is currently trading at S$0.21 on the share market, which means it is overvalued by 30.34% compared to my intrinsic value of SGD0.16. This means that the opportunity to buy Fu Yu at a good price has disappeared! Furthermore, Fu Yu’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
Can we expect growth from Fu Yu?
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. However, with a negative profit growth of -0.6% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Fu Yu. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? If you believe F13 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 F13 for some time, now may not be the best time to enter into the stock. Price climbed passed its true value, in addition to a risky 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?
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Fu Yu. You can find everything you need to know about Fu Yu in the latest infographic research report. If you are no longer interested in Fu Yu, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.