Guangzhou Automobile Group Co Ltd (SEHK:2238) saw significant share price volatility over the past couple of months on the SEHK, rising to the highs of HK$21.05 and falling to the lows of HK$17.4. 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 Guangzhou Automobile Group’s current trading price of HK$17.68 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Guangzhou Automobile Group’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 Guangzhou Automobile Group
What’s the opportunity in Guangzhou Automobile Group?
The stock is currently trading at HK$17.68 on the share market, which means it is overvalued by 61% compared to my intrinsic value of HK$11.01. This means that the buying opportunity has probably disappeared for now. In addition to this, it seems like Guangzhou Automobile Group’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Guangzhou Automobile Group?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 53.22% over the next couple of years, the future seems bright for Guangzhou Automobile 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? Guangzhou Automobile Group’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe Guangzhou Automobile 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.