HSS Engineers Berhad (KLSE:HSSEB), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the KLSE. 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? Let’s examine HSS Engineers Berhad’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for HSS Engineers Berhad
Is HSS Engineers Berhad Still Cheap?
HSS Engineers Berhad appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 HSS Engineers Berhad’s ratio of 33.08x is above its peer average of 17.76x, which suggests the stock is trading at a higher price compared to the Construction industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since HSS Engineers Berhad’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from HSS Engineers Berhad?
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 HSS Engineers Berhad. 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? HSSEB’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe HSSEB 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.