Is It Too Late To Buy Sembcorp Marine Ltd (SGX:S51)?

Sembcorp Marine Ltd (SGX:S51), a machinery company based in Singapore, led the SGX gainers with a relatively large price hike in the past couple of weeks. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Sembcorp Marine’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. See our latest analysis for Sembcorp Marine

What's the opportunity in Sembcorp Marine?

Sembcorp Marine appears to be overvalued by 35% at the moment, based on my discounted cash flow valuation. The stock is currently priced at SGD2.5 on the market compared to my intrinsic value of SGD1.85. This means that the buying opportunity has probably disappeared for now. Another thing to keep in mind is that Sembcorp Marine’s share price is quite stable relative to the rest of 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 kind of growth will Sembcorp Marine generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Sembcorp Marine’s earnings over the next few years are expected to increase by 73.88%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Sembcorp Marine’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe Sembcorp Marine 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 tabs on Sembcorp Marine for some time, 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 Sembcorp Marine, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Sembcorp Marine. You can find everything you need to know about Sembcorp Marine in the latest infographic research report. If you are no longer interested in Sembcorp Marine, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.