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What Does Valuetronics Holdings Limited's (SGX:BN2) Share Price Indicate?

Simply Wall St

Valuetronics Holdings Limited (SGX:BN2), which is in the electronic business, and is based in Hong Kong, received a lot of attention from a substantial price movement on the SGX over the last few months, increasing to S$0.84 at one point, and dropping to the lows of S$0.59. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Valuetronics Holdings's current trading price of S$0.59 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 Valuetronics Holdings’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 Valuetronics Holdings

What's the opportunity in Valuetronics Holdings?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 5.46% above my intrinsic value, which means if you buy Valuetronics Holdings today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth SGD0.56, there’s only an insignificant downside when the price falls to its real value. Furthermore, Valuetronics Holdings’s low beta implies that the stock is less volatile than the wider market.

What kind of growth will Valuetronics Holdings generate?

SGX:BN2 Past and Future Earnings, March 9th 2020

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. However, with a negative profit growth of -7.5% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Valuetronics Holdings. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? BN2 seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on BN2 for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on BN2 should the price fluctuate below its true value.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Valuetronics Holdings. You can find everything you need to know about Valuetronics Holdings in the latest infographic research report. If you are no longer interested in Valuetronics Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.