At HK$0.60, Is It Time To Put Leoch International Technology Limited (HKG:842) On Your Watch List?
Leoch International Technology Limited (HKG:842), which is in the electrical business, and is based in China, saw significant share price movement during recent months on the SEHK, rising to highs of HK$0.65 and falling to the lows of HK$0.57. 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 Leoch International Technology's current trading price of HK$0.60 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 Leoch International Technology’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 Leoch International Technology
What's the opportunity in Leoch International Technology?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 5.91x is currently trading slightly below its industry peers’ ratio of 8.99x, which means if you buy Leoch International Technology today, you’d be paying a fair price for it. And if you believe that Leoch International Technology should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Leoch International Technology’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Leoch International Technology 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. 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. Leoch International Technology’s earnings over the next few years are expected to increase by 97%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in 842’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 842? 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 tabs on 842, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for 842, 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 Leoch International Technology. You can find everything you need to know about Leoch International Technology in the latest infographic research report. If you are no longer interested in Leoch International Technology, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.
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