Dancomech Holdings Berhad (KLSE:DANCO), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the KLSE over the last few months, increasing to RM0.41 at one point, and dropping to the lows of RM0.36. 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 Dancomech Holdings Berhad's current trading price of RM0.38 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 Dancomech Holdings Berhad’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 Dancomech Holdings Berhad
What Is Dancomech Holdings Berhad Worth?
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. 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 Dancomech Holdings Berhad’s ratio of 10.49x is trading slightly above its industry peers’ ratio of 9.23x, which means if you buy Dancomech Holdings Berhad today, you’d be paying a relatively reasonable price for it. And if you believe that Dancomech Holdings Berhad should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. In addition to this, it seems like Dancomech Holdings Berhad’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.
What does the future of Dancomech Holdings Berhad look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by a double-digit 19% over the next couple of years, the outlook is positive for Dancomech Holdings 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? DANCO’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at DANCO? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?