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Xin Point Holdings Limited (HKG:1571), which is in the auto components business, and is based in China, received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$2.78 at one point, and dropping to the lows of HK$1.21. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Xin Point Holdings's current trading price of HK$1.21 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Xin Point Holdings’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 Xin Point Holdings
What's the opportunity in Xin Point Holdings?
Great news for investors – Xin Point Holdings is still trading at a fairly cheap price. 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 Xin Point Holdings’s ratio of 2.77x is below its peer average of 10.2x, which suggests the stock is undervalued compared to the Auto Components industry. Although, there may be another chance to buy again in the future. This is because Xin Point Holdings’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 does the future of Xin Point 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 revenues expected to grow by 50% over the next couple of years, the future seems bright for Xin Point Holdings. If the level of expenses is able to be maintained, 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? Since 1571 is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.