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At HK$14.32, Is Weichai Power Co., Ltd. (HKG:2338) Worth Looking At Closely?

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Simply Wall St
·3 min read
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Weichai Power Co., Ltd. (HKG:2338) led the SEHK gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today I will analyse the most recent data on Weichai Power’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Weichai Power

What's the opportunity in Weichai Power?

The stock is currently trading at HK$14.32 on the share market, which means it is overvalued by 47% compared to my intrinsic value of HK$9.74. Not the best news for investors looking to buy! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Weichai Power’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 Weichai Power?

SEHK:2338 Past and Future Earnings April 21st 2020
SEHK:2338 Past and Future Earnings April 21st 2020

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 profit expected to grow by 25% over the next couple of years, the future seems bright for Weichai Power. 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? 2338’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe 2338 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 an eye on 2338 for a while, 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 optimistic prospect is encouraging for 2338, which 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 Weichai Power. You can find everything you need to know about Weichai Power in the latest infographic research report. If you are no longer interested in Weichai Power, 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.