China Display Optoelectronics Technology Holdings Limited (HKG:334), which is in the tech business, and is based in China, saw a significant share price rise of over 20% in the past couple of months on the SEHK. Less-covered, small caps sees 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? Let’s examine China Display Optoelectronics Technology Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in China Display Optoelectronics Technology Holdings?
According to my valuation model, the stock is currently overvalued by about 34.93%, trading at HK$0.54 compared to my intrinsic value of HK$0.40. 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 China Display Optoelectronics Technology Holdings’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.
What kind of growth will China Display Optoelectronics Technology Holdings 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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 60% over the next couple of years, the future seems bright for China Display Optoelectronics Technology Holdings. 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? It seems like the market has well and truly priced in 334’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe 334 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 tabs on 334 for some time, 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 334, 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 China Display Optoelectronics Technology Holdings. You can find everything you need to know about China Display Optoelectronics Technology Holdings in the latest infographic research report. If you are no longer interested in China Display Optoelectronics Technology Holdings, 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 email@example.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.