Rhong Khen International Berhad (KLSE:RKI), is not the largest company out there, but it had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of RM1.24 to RM1.36. However, is this the true valuation level of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Rhong Khen International Berhad’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Rhong Khen International Berhad
What's The Opportunity In Rhong Khen International Berhad?
Great news for investors – Rhong Khen International Berhad is still trading at a fairly cheap price 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 10.75x is currently well-below the industry average of 15.06x, meaning that it is trading at a cheaper price relative to its peers. Rhong Khen International Berhad’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
Can we expect growth from Rhong Khen International Berhad?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Rhong Khen International Berhad, it is expected to deliver a relatively unexciting earnings growth of 8.0%, 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? Even though growth is relatively muted, since RKI is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on RKI for a while, now might be the time to enter the stock. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy RKI. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.