Genscript Biotech Corporation (HKG:1548), which is in the life sciences business, and is based in China, saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. As a HK$33b market cap stock, it seems odd Genscript Biotech is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Let’s take a look at Genscript Biotech’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Is Genscript Biotech still cheap?
According to my valuation model, the stock is currently overvalued by about 38%, trading at HK$17.00 compared to my intrinsic value of HK$12.31. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Given that Genscript Biotech’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.
What kind of growth will Genscript Biotech 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. 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 50% over the next year, the near-term future seems bright for Genscript Biotech. 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? 1548’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 1548 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 1548 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 positive outlook is encouraging for 1548, 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 Genscript Biotech. You can find everything you need to know about Genscript Biotech in the latest infographic research report. If you are no longer interested in Genscript Biotech, 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 firstname.lastname@example.org. 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.
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