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At HK$3.87, Is Chongqing Rural Commercial Bank Co., Ltd. (HKG:3618) Worth Looking At Closely?

Simply Wall St

Chongqing Rural Commercial Bank Co., Ltd. (HKG:3618), operating in the financial services industry based in China, received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$4.43 at one point, and dropping to the lows of HK$3.74. 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 Chongqing Rural Commercial Bank's current trading price of HK$3.87 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 Chongqing Rural Commercial Bank’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 Chongqing Rural Commercial Bank

What is Chongqing Rural Commercial Bank worth?

The stock seems fairly valued at the moment according to my relative valuation model. 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 3.49x is currently trading slightly below its industry peers’ ratio of 5.73x, which means if you buy Chongqing Rural Commercial Bank today, you’d be paying a reasonable price for it. And if you believe Chongqing Rural Commercial Bank should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Chongqing Rural Commercial Bank’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Chongqing Rural Commercial Bank generate?

SEHK:3618 Past and Future Earnings, December 4th 2019

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. Though in the case of Chongqing Rural Commercial Bank, it is expected to deliver a relatively unexciting earnings growth of 9.8%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? It seems like the market has already priced in 3618’s growth 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 3618? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on 3618, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive growth outlook may mean 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 Chongqing Rural Commercial Bank. You can find everything you need to know about Chongqing Rural Commercial Bank in the latest infographic research report. If you are no longer interested in Chongqing Rural Commercial Bank, 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.