In This Article:
Japfa Ltd (SGX:UD2), a food company based in Singapore, led the SGX gainers with a relatively large price hike in the past couple of weeks. 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 examine Japfa’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. See our latest analysis for Japfa
What’s the opportunity in Japfa?
Great news for investors – Japfa is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is SGD3.42, but it is currently trading at S$0.64 on the share market, meaning that there is still an opportunity to buy now. Japfa’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 its true value, 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 Japfa 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. 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 in the upcoming, the future appears to be extremely bright for Japfa. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? Since UD2 is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on UD2 for a while, now might be the time to make a leap. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy UD2. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.