At RM0.56, Is It Time To Put Southern Cable Group Berhad (KLSE:SCGBHD) On Your Watch List?

Southern Cable Group Berhad (KLSE:SCGBHD), might not be a large cap stock, but it saw a significant share price rise of 45% in the past couple of months on the KLSE. The recent share price gains has brought the company back closer to its yearly peak. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Southern Cable Group Berhad’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Southern Cable Group Berhad

Is Southern Cable Group Berhad Still Cheap?

Great news for investors – Southern Cable Group Berhad is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio 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 15.24x is currently well-below the industry average of 22.42x, meaning that it is trading at a cheaper price relative to its peers. Southern Cable 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 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 kind of growth will Southern Cable Group Berhad generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 -5.6% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Southern Cable Group Berhad. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although SCGBHD is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to SCGBHD, 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 SCGBHD for a while, but hesitant on making the leap, we recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To help with this, we've discovered 2 warning signs (1 is potentially serious!) that you ought to be aware of before buying any shares in Southern Cable Group Berhad.

If you are no longer interested in Southern Cable 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.