Is It The Right Time To Buy CWT International Limited (HKG:521)?
CWT International Limited (SEHK:521), a hospitality company based in Hong Kong, received a lot of attention from a substantial price movement on the SEHK in the over the last few months, increasing to HK$0.43 at one point, and dropping to the lows of HK$0.32. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether CWT International’s current trading price of HK$0.33 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 CWT International’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View our latest analysis for CWT International
Is CWT International still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that CWT International’s ratio of 1.07x is trading slightly below its industry peers’ ratio of 1.27x, which means if you buy CWT International today, you’d be paying a relatively reasonable price for it. And if you believe that CWT International should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. In addition to this, it seems like CWT International’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What does the future of CWT International look like?
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. 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. With revenue expected to more than double in the next few years, the future appears to be extremely bright for CWT International. If expenses can also be maintained, it looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? CWT International’s optimistic future growth appears to have been factored into the current share price, 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 CWT International? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on CWT International, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for CWT International, 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 CWT International. You can find everything you need to know about CWT International in the latest infographic research report. If you are no longer interested in CWT International, 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.
