Should You Think About Buying Thomson Medical Group Limited (SGX:A50) Now?

While Thomson Medical Group Limited (SGX:A50) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the SGX over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Thomson Medical Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Thomson Medical Group

What Is Thomson Medical Group Worth?

Thomson Medical Group is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. 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 41.95x is currently well-above the industry average of 15.61x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, Thomson Medical Group’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 levels around 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 Thomson Medical Group 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. With revenues expected to grow by 46% over the next couple of years, the future seems bright for Thomson Medical Group. If the level of expenses is able to be maintained, 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 well and truly priced in A50’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe A50 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 A50 for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for A50, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Thomson Medical Group, you'd also look into what risks it is currently facing. For example, we've found that Thomson Medical Group has 2 warning signs (1 doesn't sit too well with us!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Thomson Medical 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.