While Perak Transit Berhad (KLSE:PTRANS) might not be the most widely known stock at the moment, 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 Perak Transit Berhad’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for Perak Transit Berhad
What's The Opportunity In Perak Transit Berhad?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio 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 13.19x is currently trading slightly below its industry peers’ ratio of 15.86x, which means if you buy Perak Transit Berhad today, you’d be paying a reasonable price for it. And if you believe Perak Transit Berhad 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. Furthermore, it seems like Perak Transit Berhad’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Perak Transit Berhad?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 grow by 26% over the next couple of years, the future seems bright for Perak Transit 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? It seems like the market has already priced in PTRANS’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at PTRANS? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?