Let’s talk about the popular Hengan International Group Company Limited (SEHK:1044). The company’s shares saw a significant share price rise of over 20% in the past couple of months on the SEHK. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Hengan International Group’s outlook and value based on the most recent financial data to see if the opportunity still exists. View our latest analysis for Hengan International Group
Is Hengan International Group still cheap?
Hengan International Group appears to be overvalued by 24% at the moment, based on my discounted cash flow valuation. The stock is currently priced at HK$83.5 on the market compared to my intrinsic value of HK$67.12. This means that the buying opportunity has probably disappeared for now. Another thing to keep in mind is that Hengan International Group’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What kind of growth will Hengan International Group generate?
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. With profit expected to grow by 23.95% over the next couple of years, the future seems bright for Hengan International Group. It looks like higher cash flows 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 well and truly priced in Hengan International Group’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe Hengan International Group should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on Hengan International Group for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for Hengan International Group, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.