Is It Too Late To Consider Buying Marco Polo Marine Ltd. (SGX:5LY)?

Marco Polo Marine Ltd. (SGX:5LY), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the SGX over the last few months, increasing to S$0.03 at one point, and dropping to the lows of S$0.026. 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 Marco Polo Marine's current trading price of S$0.026 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 Marco Polo Marine’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Marco Polo Marine

Is Marco Polo Marine still cheap?

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 6.24x is currently trading slightly below its industry peers’ ratio of 10.28x, which means if you buy Marco Polo Marine today, you’d be paying a decent price for it. And if you believe Marco Polo Marine should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that Marco Polo Marine’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.

Can we expect growth from Marco Polo Marine?

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 Marco Polo Marine, it is expected to deliver a highly negative earnings growth in the next few years, 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, 5LY 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 de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on 5LY, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on 5LY 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 5LY should the price fluctuate below the industry PE ratio.

So while earnings quality is important, it's equally important to consider the risks facing Marco Polo Marine at this point in time. Be aware that Marco Polo Marine is showing 3 warning signs in our investment analysis and 1 of those makes us a bit uncomfortable...

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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.