Capital A Berhad (KLSE:CAPITALA), is not the largest company out there, but it led the KLSE gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine Capital A Berhad’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
View our latest analysis for Capital A Berhad
What Is Capital A 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. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Capital A Berhad’s ratio of 10.64x is trading slightly below its industry peers’ ratio of 15.04x, which means if you buy Capital A Berhad today, you’d be paying a reasonable price for it. And if you believe Capital A Berhad 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, it seems like Capital A Berhad’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Capital A Berhad?
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 revenues expected to grow by 49% over the next couple of years, the future seems bright for Capital A Berhad. If the level of expenses is able to be maintained, 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? It seems like the market has already priced in CAPITALA’s positive outlook, 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 CAPITALA? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?