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Should You Investigate Skyworth Group Limited (HKG:751) At HK$1.95?

Simply Wall St

Skyworth Group Limited (HKG:751), which is in the consumer durables business, and is based in Hong Kong, received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$2.29 at one point, and dropping to the lows of HK$1.94. 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 Skyworth Group's current trading price of HK$1.95 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Skyworth Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Skyworth Group

Is Skyworth Group still cheap?

According to my valuation model, Skyworth Group seems to be fairly priced at around 10% below my intrinsic value, which means if you buy Skyworth Group today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth HK$2.18, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Skyworth Group’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 Skyworth Group?

SEHK:751 Past and Future Earnings, August 18th 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. In the upcoming year, Skyworth Group’s earnings are expected to increase by 62%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in 751’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 the stock? 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 tabs on 751, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into 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 Skyworth Group. You can find everything you need to know about Skyworth Group in the latest infographic research report. If you are no longer interested in Skyworth Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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.

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. Thank you for reading.