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While Frencken Group Limited (SGX:E28) might not have the largest market cap around , it saw significant share price movement during recent months on the SGX, rising to highs of S$1.24 and falling to the lows of S$1.07. 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 Frencken Group's current trading price of S$1.07 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 Frencken Group’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 Frencken Group
What's The Opportunity In Frencken Group?
According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. We’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 11.86x is currently trading slightly below its industry peers’ ratio of 11.97x, which means if you buy Frencken Group today, you’d be paying a decent price for it. And if you believe that Frencken Group should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Is there another opportunity to buy low in the future? Since Frencken Group’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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.
What kind of growth will Frencken Group generate?
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 grow by 22% over the next couple of years, the future seems bright for Frencken Group. 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? E28’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 E28? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?