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SUNeVision Holdings Ltd (SEHK:1686), a internet company based in Hong Kong, received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$5.67 at one point, and dropping to the lows of HK$4.28. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether SUNeVision Holdings’s current trading price of HK$4.68 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 SUNeVision 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 SUNeVision Holdings
Is SUNeVision Holdings still cheap?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 25.15x is currently trading slightly above its industry peers’ ratio of 23.14x, which means if you buy SUNeVision Holdings today, you’d be paying a relatively reasonable price for it. And if you believe SUNeVision Holdings should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, it seems like SUNeVision Holdings’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What does the future of SUNeVision 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. However, with a negative profit growth of -13.36% expected next year, near-term growth certainly doesn’t appear to be a driver for a buy decision for SUNeVision Holdings. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Currently, 1686 appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on 1686, take a look at whether its fundamentals have changed.