Xinchen China Power Holdings Limited (SEHK:1148), a auto components company based in Hong Kong, saw significant share price volatility over the past couple of months on the SEHK, rising to the highs of HK$1.35 and falling to the lows of HK$1.02. 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 Xinchen China Power Holdings’s current trading price of HK$1.02 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 Xinchen China Power Holdings’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 Xinchen China Power Holdings
What’s the opportunity in Xinchen China Power Holdings?
Good news, investors! Xinchen China Power Holdings is still a bargain right now. 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 Xinchen China Power Holdings’s ratio of 8.6x is below its peer average of 14.2x, which suggests the stock is undervalued compared to the auto components industry. Although, there may be another chance to buy again in the future. This is because Xinchen China Power 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 Xinchen China Power 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. Xinchen China Power Holdings’s earnings over the next few years are expected to increase by 78.09%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? Since Xinchen China Power Holdings is currently undervalued, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.