Should You Buy Dongfeng Motor Group Company Limited (HKG:489) At $9.18?
Let’s talk about the popular Dongfeng Motor Group Company Limited (SEHK:489). The company’s shares saw a decent share price growth in the teens level on the SEHK over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today I will analyse the most recent data on Dongfeng Motor Group’s outlook and valuation to see if the opportunity still exists. View our latest analysis for Dongfeng Motor Group
What is Dongfeng Motor Group worth?
Great news for investors – Dongfeng Motor Group is still trading at a fairly cheap price. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Dongfeng Motor Group’s ratio of 4.59x is below its peer average of 14.36x, which suggests the stock is undervalued compared to the Auto industry. However, given that Dongfeng Motor Group’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 kind of growth will Dongfeng Motor Group generate?
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 profit growth of 3.77% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Dongfeng Motor Group, at least in the short term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since 489 is currently undervalued, it may be a great time to increase your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on 489 for a while, now might be the time to enter the stock. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 489. 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 buy.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Dongfeng Motor Group. You can find everything you need to know about Dongfeng Motor Group in the latest infographic research report. If you are no longer interested in Dongfeng Motor Group, 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.
