Shanghai Jin Jiang Capital Company Limited (HKG:2006), which is in the hospitality business, and is based in China, saw a significant share price rise of over 20% in the past couple of months on the SEHK. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Shanghai Jin Jiang Capital’s outlook and valuation to see if the opportunity still exists.
What is Shanghai Jin Jiang Capital worth?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 11.17x is currently trading slightly below its industry peers’ ratio of 12.88x, which means if you buy Shanghai Jin Jiang Capital today, you’d be paying a fair price for it. And if you believe Shanghai Jin Jiang Capital should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Shanghai Jin Jiang Capital’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Shanghai Jin Jiang Capital generate?
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. With profit expected to grow by 34% over the next couple of years, the future seems bright for Shanghai Jin Jiang Capital. 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 already priced in 2006’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 financial strength of the company. Have these factors changed since the last time you looked at 2006? 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 2006, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for 2006, 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 Shanghai Jin Jiang Capital. You can find everything you need to know about Shanghai Jin Jiang Capital in the latest infographic research report. If you are no longer interested in Shanghai Jin Jiang Capital, 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 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.
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