In This Article:
China Youzan Limited (HKG:8083), which is in the software 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. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at China Youzan’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Check out our latest analysis for China Youzan
What's the opportunity in China Youzan?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 15.40% above my intrinsic value, which means if you buy China Youzan today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is HK$0.42, there’s only an insignificant downside when the price falls to its real value. What's more, China Youzan’s share price may be more stable over time (relative to the market), as indicated by its low beta.
What does the future of China Youzan 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 profit expected to grow by 75% over the next couple of years, the future seems bright for China Youzan. 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 8083’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 the stock? 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 8083, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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.