Bank of Chongqing Co., Ltd. (HKG:1963), operating in the financial services industry based in China, saw significant share price movement during recent months on the SEHK, rising to highs of HK$4.68 and falling to the lows of HK$4.23. 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 Bank of Chongqing's current trading price of HK$4.46 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 Bank of Chongqing’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Bank of Chongqing

What is Bank of Chongqing worth?

According to my relative valuation model, the stock seems to be currently fairly priced. 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 Bank of Chongqing’s ratio of 3.49x is trading slightly below its industry peers’ ratio of 5.81x, which means if you buy Bank of Chongqing today, you’d be paying a fair price for it. And if you believe that Bank of Chongqing 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 Bank of Chongqing’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.

Can we expect growth from Bank of Chongqing?

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. Though in the case of Bank of Chongqing, it is expected to deliver a relatively unexciting earnings growth of 7.3%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? It seems like the market has already priced in 1963’s growth 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 1963? Will you have enough conviction to buy should the price fluctuate below the true value?