In This Article:
Yangzijiang Shipbuilding (Holdings) Ltd. (SGX:BS6), is not the largest company out there, but it received a lot of attention from a substantial price increase on the SGX over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Yangzijiang Shipbuilding (Holdings)’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for Yangzijiang Shipbuilding (Holdings)
Is Yangzijiang Shipbuilding (Holdings) Still Cheap?
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 7.04x is currently trading slightly below its industry peers’ ratio of 8.21x, which means if you buy Yangzijiang Shipbuilding (Holdings) today, you’d be paying a decent price for it. And if you believe Yangzijiang Shipbuilding (Holdings) 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, Yangzijiang Shipbuilding (Holdings)’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What kind of growth will Yangzijiang Shipbuilding (Holdings) 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. Though in the case of Yangzijiang Shipbuilding (Holdings), it is expected to deliver a negative earnings growth of -18%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? BS6 seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on BS6, take a look at whether its fundamentals have changed.