Sunningdale Tech Ltd (SGX:BHQ), a machinery company based in Singapore, received a lot of attention from a substantial price movement on the SGX in the over the last few months, increasing to SGD2.36 at one point, and dropping to the lows of SGD1.85. 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 Sunningdale Tech’s current trading price of SGD1.87 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 Sunningdale Tech’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 Sunningdale Tech
What’s the opportunity in Sunningdale Tech?
Great news for investors – Sunningdale Tech is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is SGD3.73, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Sunningdale Tech’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Sunningdale Tech?
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. 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 negative profit growth of -4.77% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Sunningdale Tech. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although Sunningdale Tech is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to Sunningdale Tech, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on Sunningdale Tech for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.