Great Wall Motor Company Limited (HKG:2333), which is in the auto 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$5.97 at one point, and dropping to the lows of HK$4.75. 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 Great Wall Motor's current trading price of HK$5.20 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Great Wall Motor’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Great Wall Motor worth?
According to my valuation model, Great Wall Motor seems to be fairly priced at around 2.34% above my intrinsic value, which means if you buy Great Wall Motor today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is HK$5.08, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that Great Wall Motor’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Great Wall Motor generate?
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. 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. With profit expected to grow by 52% over the next couple of years, the future seems bright for Great Wall Motor. 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 already priced in 2333’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on 2333, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Great Wall Motor. You can find everything you need to know about Great Wall Motor in the latest infographic research report. If you are no longer interested in Great Wall Motor, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.