Why Shanghai Jin Jiang Capital Company Limited (HKG:2006) Could Be Worth Watching
Shanghai Jin Jiang Capital Company Limited (HKG:2006), which is in the hospitality business, and is based in China, received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$1.99 at one point, and dropping to the lows of HK$1.42. 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 Shanghai Jin Jiang Capital's current trading price of HK$1.42 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 Shanghai Jin Jiang Capital’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Shanghai Jin Jiang Capital
What is Shanghai Jin Jiang Capital worth?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Shanghai Jin Jiang Capital’s ratio of 9.13x is trading slightly below its industry peers’ ratio of 13.79x, which means if you buy Shanghai Jin Jiang Capital today, you’d be paying a fair price for it. And if you believe that Shanghai Jin Jiang Capital should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Shanghai Jin Jiang Capital’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Shanghai Jin Jiang Capital 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. 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 profit expected to grow by 33% 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? 2006’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 track record of its management team. 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 optimistic forecast 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.
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 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. Thank you for reading.
