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Dongfeng Motor Group Company Limited (HKG:489), which is in the auto business, and is based in China, saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. As a mid-cap 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 Dongfeng Motor Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Check out our latest analysis for Dongfeng Motor Group
Is Dongfeng Motor Group still cheap?
Good news, investors! Dongfeng Motor Group is still a bargain right now. 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 Dongfeng Motor Group’s ratio of 3.82x is below its peer average of 9.16x, which suggests the stock is undervalued compared to the Auto industry. Although, there may be another chance to buy again in the future. This is because Dongfeng Motor Group’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 Dongfeng Motor 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. However, with a relatively muted profit growth of 4.8% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Dongfeng Motor Group, at least in the short term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since 489 is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on 489 for a while, now might be the time to enter the stock. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 489. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.