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Is C.P. Pokphand Co. Ltd. (HKG:43) Potentially Undervalued?

Simply Wall St

C.P. Pokphand Co. Ltd. (HKG:43), which is in the food business, and is based in Hong Kong, had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of HK$0.64 to HK$0.70. However, is this the true valuation level of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at C.P. Pokphand’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 C.P. Pokphand

Is C.P. Pokphand still cheap?

Great news for investors – C.P. Pokphand is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is HK$0.90, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that C.P. Pokphand’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.

Can we expect growth from C.P. Pokphand?

SEHK:43 Past and Future Earnings, September 30th 2019

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 -0.2% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for C.P. Pokphand. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although 43 is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to 43, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on 43 for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on C.P. Pokphand. You can find everything you need to know about C.P. Pokphand in the latest infographic research report. If you are no longer interested in C.P. Pokphand, 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 editorial-team@simplywallst.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. Thank you for reading.