China Everbright Greentech Limited (HKG:1257), which is in the renewable energy business, and is based in Hong Kong, saw significant share price movement during recent months on the SEHK, rising to highs of HK$5.53 and falling to the lows of HK$4.56. 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 China Everbright Greentech's current trading price of HK$4.62 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 China Everbright Greentech’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is China Everbright Greentech still cheap?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that China Everbright Greentech’s ratio of 6.39x is trading slightly below its industry peers’ ratio of 9.39x, which means if you buy China Everbright Greentech today, you’d be paying a reasonable price for it. And if you believe that China Everbright Greentech should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Furthermore, China Everbright Greentech’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
Can we expect growth from China Everbright Greentech?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. China Everbright Greentech’s earnings over the next few years are expected to increase by 54%, 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 1257’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 1257? 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 1257, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for 1257, which means it’s worth further examining 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 China Everbright Greentech. You can find everything you need to know about China Everbright Greentech in the latest infographic research report. If you are no longer interested in China Everbright Greentech, 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 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. Thank you for reading.