What does the stock price of Keppel Corporation Limited (SGX:BN4) indicate?

Keppel Corporation Limited (SGX:BN4), may not be a large-cap stock, but it has received a lot of attention due to substantial price movement on the SGX over the past few months, rising to S$7.52 at any given time, and falling to the minimum of S$6.39. Certain movements in the stock price can give investors a better opportunity to get into the stock and potentially buy at a lower price. A question that needs to be answered is whether Keppel’s current trading price of S$6.95 reflects the true value of the mid cap? Or is it currently undervalued, giving us the opportunity to buy? Let’s take a look at Keppel’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 Keppel

Is Keppel still cheap?

According to my valuation model, the stock is currently overvalued by around 34%, trading at S$6.95 versus my intrinsic value of SGD5.17. This means that the opportunity to buy Keppel at a good price is gone! On top of that, it looks like Keppel’s stock price is pretty stable, which could mean two things: one, it may take some time for the stock price to fall back into an attractive buy range, and second, there may be less chance of buying low in the future once it hits that value. This is because the stock is less volatile than the broader market given its low beta.

Can we expect Keppel to grow?

SGX: BN4 Earnings and Revenue Growth October 2, 2022

Investors looking for portfolio growth may want to consider a company’s prospects before buying its stock. Although value investors argue that it is intrinsic value relative to price that matters most, a more compelling investment thesis would be high growth potential at a cheap price. However, with negative earnings growth of -16% expected over the next two years, near-term growth certainly does not appear to be a driver for a buy decision for Keppel. This certainty tilts the risk-reward scale toward higher risk.

What this means for you

Are you a shareholder? If you think BN4 is currently trading above its value, selling at a high price and buying it back when its price drops towards its true value can be profitable. Given the uncertainty of negative growth in the future, now could be a good time to reduce the total risk in your portfolio. But before making this decision, see if its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on BN4 for a while, now might not be the best time to get into the stock. Its price has risen beyond its true value, in addition to negative future prospects. However, there are also other important factors that we have not considered today, such as the financial strength of the company. If the price were to drop in the future, would you be informed enough to buy?

So, if you want to dig deeper into this stock, it is crucial to consider the risks it faces. For example, Keppel has 4 warning signs (and 2 that make us uncomfortable) that we think you should know about.

If you are no longer interested in Keppel, you can use our free platform to view our list of over 50 other stocks with high growth potential.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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Eleanor C. William