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What Does Dongfeng Motor Group Company Limited's (HKG:489) Share Price Indicate?

Simply Wall St

Dongfeng Motor Group Company Limited (HKG:489), which is in the auto business, and is based in China, received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$8.47 at one point, and dropping to the lows of HK$7.21. 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 Dongfeng Motor Group's current trading price of HK$7.28 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 Dongfeng Motor Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Dongfeng Motor Group

Is Dongfeng Motor Group still cheap?

According to my valuation model, the stock is currently overvalued by about 30%, trading at HK$7.28 compared to my intrinsic value of HK$5.58. This means that the opportunity to buy Dongfeng Motor Group at a good price has disappeared! Furthermore, Dongfeng Motor Group’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

Can we expect growth from Dongfeng Motor Group?

SEHK:489 Past and Future Earnings, December 25th 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 relatively muted profit growth of 8.5% 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? It seems like the market has well and truly priced in 489’s future outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe 489 should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. 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 tabs on 489 for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook means 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 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.

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.

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. Thank you for reading.