Is Golden Agri-Resources Ltd (SGX:E5H) Potentially Undervalued?

By
Simply Wall St
Published
November 25, 2021
SGX:E5H
Source: Shutterstock

Golden Agri-Resources Ltd (SGX:E5H), 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. 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, could the stock still be trading at a relatively cheap price? Let’s take a look at Golden Agri-Resources’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Golden Agri-Resources

Is Golden Agri-Resources still cheap?

Good news, investors! Golden Agri-Resources is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Golden Agri-Resources’s ratio of 5.32x is below its peer average of 12.53x, which indicates the stock is trading at a lower price compared to the Food industry. Golden Agri-Resources’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 industry peers, 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.

What does the future of Golden Agri-Resources look like?

earnings-and-revenue-growth
SGX:E5H Earnings and Revenue Growth November 26th 2021

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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Golden Agri-Resources, at least in the near future.

What this means for you:

Are you a shareholder? Although E5H is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to E5H, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on E5H for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 3 warning signs for Golden Agri-Resources (of which 2 are potentially serious!) you should know about.

If you are no longer interested in Golden Agri-Resources, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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