Hong Leong Asia Ltd. (SGX:H22), is not the largest company out there, but it had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of S$0.59 to S$0.63. However, is this the true valuation level of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Hong Leong Asia’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Hong Leong Asia

Is Hong Leong Asia Still Cheap?

Great news for investors – Hong Leong Asia 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. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. we find that Hong Leong Asia’s ratio of 7.02x is below its peer average of 8.97x, which indicates the stock is trading at a lower price compared to the Machinery industry. What’s more interesting is that, Hong Leong Asia’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Hong Leong Asia 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. 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. With profit expected to grow by 28% over the next couple of years, the future seems bright for Hong Leong Asia. 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? Since H22 is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on H22 for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy H22. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.