Why Wegmans Holdings Berhad (KLSE:WEGMANS) Could Be Worth Watching
Wegmans Holdings Berhad (KLSE:WEGMANS), might not be a large cap stock, but it saw significant share price movement during recent months on the KLSE, rising to highs of RM0.21 and falling to the lows of RM0.19. 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 Wegmans Holdings Berhad's current trading price of RM0.20 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 Wegmans Holdings Berhad’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 Wegmans Holdings Berhad
What Is Wegmans Holdings Berhad Worth?
According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Wegmans Holdings Berhad’s ratio of 6.01x is trading slightly below its industry peers’ ratio of 9.18x, which means if you buy Wegmans Holdings Berhad today, you’d be paying a decent price for it. And if you believe Wegmans Holdings 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. In addition to this, it seems like Wegmans Holdings Berhad’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Wegmans Holdings Berhad?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 -13% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Wegmans Holdings Berhad. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Currently, WEGMANS appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on WEGMANS, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on WEGMANS for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, 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 WEGMANS should the price fluctuate below the industry PE ratio.
So while earnings quality is important, it's equally important to consider the risks facing Wegmans Holdings Berhad at this point in time. For instance, we've identified 3 warning signs for Wegmans Holdings Berhad (1 can't be ignored) you should be familiar with.
If you are no longer interested in Wegmans Holdings Berhad, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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