Engtex Group Berhad (KLSE:ENGTEX), 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 RM0.70 at one point, and dropping to the lows of RM0.61. 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 Engtex Group Berhad's current trading price of RM0.64 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 Engtex Group Berhad’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Engtex Group Berhad
What's The Opportunity In Engtex Group Berhad?
According to my 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. 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 8.54x is currently trading slightly below its industry peers’ ratio of 11.69x, which means if you buy Engtex Group Berhad today, you’d be paying a reasonable price for it. And if you believe Engtex Group 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 Engtex Group 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.
What does the future of Engtex Group Berhad look like?
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. Engtex Group Berhad's earnings over the next few years are expected to increase by 100%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? ENGTEX’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 ENGTEX? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?