CRCC High-Tech Equipment Corporation Limited (HKG:1786), which is in the machinery business, and is based in China, saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. Less-covered, small caps sees 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 take a look at CRCC High-Tech Equipment’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What's the opportunity in CRCC High-Tech Equipment?
According to my valuation model, CRCC High-Tech Equipment seems to be fairly priced at around 9.25% above my intrinsic value, which means if you buy CRCC High-Tech Equipment today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth HK$1.11, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since CRCC High-Tech Equipment’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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.
Can we expect growth from CRCC High-Tech Equipment?
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. 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. With revenue expected to more than double in the next few years, the future appears to be extremely bright for CRCC High-Tech Equipment. If expenses can also be maintained, 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? It seems like the market has already priced in 1786’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? 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 tabs on 1786, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, 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 CRCC High-Tech Equipment. You can find everything you need to know about CRCC High-Tech Equipment in the latest infographic research report. If you are no longer interested in CRCC High-Tech Equipment, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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.
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