SIA Engineering Company Limited (SGX:S59), a infrastructure company based in Singapore, saw significant share price volatility over the past couple of months on the SGX, rising to the highs of SGD3.49 and falling to the lows of SGD3.12. 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 SIA Engineering’s current trading price of SGD3.12 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at SIA Engineering’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View our latest analysis for SIA Engineering
What is SIA Engineering worth?
According to my valuation model, the stock is currently overvalued by about 50%, trading at SGD3.12 compared to my intrinsic value of SGD2.08. This means that the opportunity to buy SIA Engineering at a good price has disappeared! Furthermore, SIA Engineering’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 true value, 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.
What kind of growth will SIA Engineering generate?
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. However, with a relatively muted profit growth of 5.66% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for SIA Engineering, at least in the short term.
What this means for you:
Are you a shareholder? SIA Engineering’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 SIA Engineering 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 SIA Engineering 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.