Is Now The Time To Look At Buying Engtex Group Berhad (KLSE:ENGTEX)?

Engtex Group Berhad (KLSE:ENGTEX), might not be a large cap stock, but it led the KLSE gainers with a relatively large price hike in the past couple of weeks. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Engtex Group Berhad’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Engtex Group Berhad

What's The Opportunity In Engtex Group Berhad?

Engtex Group Berhad is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 45.04x is currently well-above the industry average of 13.59x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, Engtex Group Berhad’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 levels around its industry peers, 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 does the future of Engtex Group Berhad look like?

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. With profit expected to more than double over the next couple of years, the future seems bright for Engtex Group Berhad. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? ENGTEX’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe ENGTEX should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 ENGTEX for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for ENGTEX, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Engtex Group Berhad, you'd also look into what risks it is currently facing. Be aware that Engtex Group Berhad is showing 3 warning signs in our investment analysis and 1 of those can't be ignored...

If you are no longer interested in Engtex Group Berhad, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.