Is There Now An Opportunity In Sarine Technologies Ltd. (SGX:U77)?

Sarine Technologies Ltd. (SGX:U77), is not the largest company out there, but it saw a decent share price growth in the teens level on the SGX over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on Sarine Technologies’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Sarine Technologies

What's The Opportunity In Sarine Technologies?

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 13.73x is currently trading slightly above its industry peers’ ratio of 10.84x, which means if you buy Sarine Technologies today, you’d be paying a relatively reasonable price for it. And if you believe that Sarine Technologies should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. So, is there another chance to buy low in the future? Given that Sarine Technologies’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.

What does the future of Sarine Technologies look like?

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. Though in the case of Sarine Technologies, it is expected to deliver a negative earnings growth of -16%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Currently, U77 appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on U77, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on U77 for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on U77 should the price fluctuate below the industry PE ratio.

If you'd like to know more about Sarine Technologies as a business, it's important to be aware of any risks it's facing. For example, Sarine Technologies has 4 warning signs (and 1 which is potentially serious) we think you should know about.

If you are no longer interested in Sarine Technologies, 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.