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SATS Ltd (SGX:S58), a infrastructure company based in Singapore, saw a double-digit share price rise of over 10% in the past couple of months on the SGX. 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, what if the stock is still a bargain? Today I will analyse the most recent data on SATS’s outlook and valuation to see if the opportunity still exists. See our latest analysis for SATS
What is SATS worth?
According to my valuation model, the stock is currently overvalued by about 98%, trading at S$5.56 compared to my intrinsic value of SGD2.81. This means that the opportunity to buy SATS at a good price has disappeared! In addition to this, it seems like SATS’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will SATS 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 SATS, it is expected to deliver a relatively unexciting earnings growth of 8.98%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? S58’s future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe S58 should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on S58 for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook means it’s worth diving deeper into other factors in order to take advantage of the next price drop.