China Huarong Asset Management Co., Ltd. (HKG:2799), which is in the capital markets business, and is based in China, saw significant share price movement during recent months on the SEHK, rising to highs of HK$1.34 and falling to the lows of HK$1.11. 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 China Huarong Asset Management's current trading price of HK$1.16 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 China Huarong Asset Management’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in China Huarong Asset Management?
According to my relative valuation model, the stock seems to be currently fairly priced. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 11.95x is currently trading slightly above its industry peers’ ratio of 11.85x, which means if you buy China Huarong Asset Management today, you’d be paying a relatively reasonable price for it. And if you believe that China Huarong Asset Management should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Furthermore, it seems like China Huarong Asset Management’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.
What kind of growth will China Huarong Asset Management generate?
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. With profit expected to more than double over the next couple of years, the future seems bright for China Huarong Asset Management. 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 2799’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 track record of its management team. Have these factors changed since the last time you looked at 2799? Will you have enough conviction to buy should the price fluctuate below the true value?
Are you a potential investor? If you’ve been keeping tabs on 2799, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for 2799, which means it’s worth further examining 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 China Huarong Asset Management. You can find everything you need to know about China Huarong Asset Management in the latest infographic research report. If you are no longer interested in China Huarong Asset Management, 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.
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.