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Is It Time To Consider Buying 361 Degrees International Limited (HKG:1361)?

Simply Wall St

361 Degrees International Limited (HKG:1361), which is in the luxury business, and is based in China, saw significant share price movement during recent months on the SEHK, rising to highs of HK$1.83 and falling to the lows of HK$1.31. 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 361 Degrees International's current trading price of HK$1.38 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 361 Degrees 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 361 Degrees International

What's the opportunity in 361 Degrees International?

According to my relative valuation model, the stock seems to be currently fairly priced. 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 7.61x is currently trading slightly below its industry peers’ ratio of 8.98x, which means if you buy 361 Degrees International today, you’d be paying a reasonable price for it. And if you believe that 361 Degrees International should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since 361 Degrees International’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 does the future of 361 Degrees International look like?

SEHK:1361 Past and Future Earnings, January 6th 2020

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 56% over the next couple of years, the future seems bright for 361 Degrees International. 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 1361’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 1361? 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 1361, 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 1361, 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 361 Degrees International. You can find everything you need to know about 361 Degrees International in the latest infographic research report. If you are no longer interested in 361 Degrees International, 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 editorial-team@simplywallst.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.

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. Thank you for reading.