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CIMC Enric Holdings Limited (HKG:3899), which is in the machinery business, and is based in China, received a lot of attention from a substantial price increase on the SEHK over the last few months. 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. But what if there is still an opportunity to buy? Let’s take a look at CIMC Enric Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.
See our latest analysis for CIMC Enric Holdings
What’s the opportunity in CIMC Enric Holdings?
According to my relative valuation model, the stock is currently overvalued. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 18.15x is currently well-above the industry average of 10.14x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Given that CIMC Enric Holdings’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of CIMC Enric Holdings 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. 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. With profit expected to grow by 50% over the next couple of years, the future seems bright for CIMC Enric Holdings. 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 well and truly priced in 3899’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 3899 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 3899 for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for 3899, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.