While China MeiDong Auto Holdings Limited (HKG:1268) might not have the largest market cap around , it saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. While good news for shareholders, the company has traded much higher in the past year. 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. However, what if the stock is still a bargain? Today we will analyse the most recent data on China MeiDong Auto Holdings’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for China MeiDong Auto Holdings
What's The Opportunity In China MeiDong Auto Holdings?
China MeiDong Auto Holdings appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that China MeiDong Auto Holdings’s ratio of 38.31x is above its peer average of 8.54x, which suggests the stock is trading at a higher price compared to the Specialty Retail industry. But, is there another opportunity to buy low in the future? Given that China MeiDong Auto 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 China MeiDong Auto Holdings look like?
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 more than double over the next couple of years, the future seems bright for China MeiDong Auto 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? 1268’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe 1268 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 1268 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 positive outlook is encouraging for 1268, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you want to dive deeper into China MeiDong Auto Holdings, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 2 warning signs for China MeiDong Auto Holdings and you'll want to know about these.
If you are no longer interested in China MeiDong Auto Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.