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Viomi Technology Co., Ltd (NASDAQ:VIOT), is not the largest company out there, but it received a lot of attention from a substantial price increase on the NASDAQGS over the last few months. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on Viomi Technology’s outlook and valuation to see if the opportunity still exists.
What is Viomi Technology worth?
According to my valuation model, the stock is currently overvalued by about 23%, trading at US$9.25 compared to my intrinsic value of $7.51. This means that the opportunity to buy Viomi Technology at a good price has disappeared! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Viomi Technology’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.
Can we expect growth from Viomi Technology?
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. Viomi Technology's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? VIOT’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 VIOT 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 VIOT 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 VIOT, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 2 warning signs for Viomi Technology and you'll want to know about these.
If you are no longer interested in Viomi Technology, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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