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Media Chinese International Limited (HKG:685), which is in the media business, and is based in Hong Kong, saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine Media Chinese International’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in Media Chinese International?
Great news for investors – Media Chinese International is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is HK$0.57, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, Media Chinese International’s share price is theoretically quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What does the future of Media Chinese International look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with an expected decline of -14% in revenues over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Media Chinese International. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although 685 is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to 685, 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 685 for some time, but hesitant on making the leap, I recommend you dig deeper 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 Media Chinese International. You can find everything you need to know about Media Chinese International in the latest infographic research report. If you are no longer interested in Media Chinese International, 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.