51job, Inc. (NASDAQ:JOBS), which is in the professional services business, and is based in China, saw significant share price movement during recent months on the NASDAQGS, rising to highs of $95.02 and falling to the lows of $66.06. 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 51job's current trading price of $71.89 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at 51job’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
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Is 51job still cheap?
51job appears to be overvalued by 20.39% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$71.89 on the market compared to my intrinsic value of $59.72. This means that the opportunity to buy 51job at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that 51job’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of 51job 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. However, with a negative profit growth of -2.5% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for 51job. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? If you believe JOBS is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to de-risk your portfolio. 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 an eye on JOBS for a while, now may not be the best time to enter into the stock. Price climbed passed its true value, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on 51job. You can find everything you need to know about 51job in the latest infographic research report. If you are no longer interested in 51job, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.