When Should You Buy SIA Engineering Company Limited (SGX:S59)?

While SIA Engineering Company Limited (SGX:S59) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the SGX over the last few months, increasing to S$2.51 at one point, and dropping to the lows of S$2.18. 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 SIA Engineering's current trading price of S$2.29 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 SIA Engineering’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 SIA Engineering

What's The Opportunity In SIA Engineering?

SIA Engineering appears to be overvalued by 28% at the moment, based on my discounted cash flow valuation. The stock is currently priced at S$2.29 on the market compared to my intrinsic value of SGD1.79. This means that the buying opportunity has probably disappeared for now. In addition to this, it seems like SIA Engineering’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from SIA Engineering?

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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to more than double over the next couple of years, the future seems bright for SIA Engineering. 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 S59’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe S59 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 an eye on S59 for a while, 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 S59, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. While conducting our analysis, we found that SIA Engineering has 1 warning sign and it would be unwise to ignore this.

If you are no longer interested in SIA Engineering, 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.