Sembcorp Industries Ltd (SGX:U96), which is in the industrials business, and is based in Singapore, received a lot of attention from a substantial price movement on the SGX over the last few months, increasing to SGD2.77 at one point, and dropping to the lows of SGD2.33. 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 Sembcorp Industries's current trading price of SGD2.42 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 Sembcorp Industries’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Sembcorp Industries still cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 14.16% above my intrinsic value, which means if you buy Sembcorp Industries today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth SGD2.12, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, Sembcorp Industries has a low beta, which suggests its share price is less volatile than the wider market.
Can we expect growth from Sembcorp Industries?
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. Sembcorp Industries’s earnings over the next few years are expected to increase by 56%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? U96’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on U96, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Sembcorp Industries. You can find everything you need to know about Sembcorp Industries in the latest infographic research report. If you are no longer interested in Sembcorp Industries, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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If you spot an error that warrants correction, please contact the editor at email@example.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. Thank you for reading.