Sky Solar Holdings Ltd (NASDAQ:SKYS), a renewable energy company based in Hong Kong, received a lot of attention from a substantial price increase on the NasdaqCM 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 Sky Solar Holdings’s outlook and valuation to see if the opportunity still exists. View our latest analysis for Sky Solar Holdings
What’s the opportunity in Sky Solar Holdings?
Great news for investors – Sky Solar Holdings is still trading at a fairly cheap price. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Sky Solar Holdings’s ratio of 5.06x is below its peer average of 15.19x, which suggests the stock is undervalued compared to the Renewable Energy industry. Although, there may be another chance to buy again in the future. This is because Sky Solar Holdings’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 Sky Solar 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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Sky Solar Holdings, at least in the near future.
What this means for you:
Are you a shareholder? Although SKYS is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to SKYS, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on SKYS for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Sky Solar Holdings. You can find everything you need to know about Sky Solar Holdings in the latest infographic research report. If you are no longer interested in Sky Solar Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.