Concord Medical Services Holdings Limited (NYSE:CCM), a healthcare company based in China, saw a significant share price rise of over 20% in the past couple of months on the NYSE. 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 examine Concord Medical Services Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. View our latest analysis for Concord Medical Services Holdings
What is Concord Medical Services Holdings worth?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 0.83x is currently trading slightly below its industry peers’ ratio of 2.5x, which means if you buy Concord Medical Services Holdings today, you’d be paying a relatively fair price for it. And if you believe that Concord Medical Services Holdings should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Furthermore, it seems like Concord Medical Services Holdings’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Concord Medical Services Holdings?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with a relatively muted revenue growth of 3.77% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Concord Medical Services Holdings, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in CCM’s growth outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at CCM? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on CCM, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Concord Medical Services Holdings. You can find everything you need to know about Concord Medical Services Holdings in the latest infographic research report. If you are no longer interested in Concord Medical Services Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.