United U-LI Corporation Berhad (KLSE:ULICORP), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the KLSE. 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? Today I will analyse the most recent data on United U-LI Corporation Berhad’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for United U-LI Corporation Berhad
What Is United U-LI Corporation 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. 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 9.4x is currently trading in-line with its industry peers’ ratio, which means if you buy United U-LI Corporation Berhad today, you’d be paying a relatively sensible price for it. Is there another opportunity to buy low in the future? Since United U-LI Corporation Berhad’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 does the future of United U-LI Corporation Berhad 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 grow by 36% over the next year, the near-term future seems bright for United U-LI Corporation 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? ULICORP’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 ULICORP? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?