Bumitama Agri Ltd (SGX:P8Z), a food company based in Indonesia, received a lot of attention from a substantial price movement on the SGX in the over the last few months, increasing to SGD0.84 at one point, and dropping to the lows of SGD0.73. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Bumitama Agri’s current trading price of SGD0.75 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 Bumitama Agri’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 Bumitama Agri
What is Bumitama Agri worth?
According to my valuation model, Bumitama Agri seems to be fairly priced at around 13% below my intrinsic value, which means if you buy Bumitama Agri today, you’d be paying a reasonable price for it. And if you believe the company’s true value is SGD0.85, then there’s not much of an upside to gain from mispricing. Furthermore, Bumitama Agri’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.
Can we expect growth from Bumitama Agri?
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. Bumitama Agri’s earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? Bumitama Agri’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on Bumitama Agri, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.