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Leoch International Technology Limited (HKG:842), which is in the electrical business, and is based in China, saw significant share price volatility over the past couple of months on the SEHK, rising to the highs of HK$0.79 and falling to the lows of HK$0.61. 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 Leoch International Technology’s current trading price of HK$0.61 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.
Check out our latest analysis for Leoch International Technology
What’s the opportunity in Leoch International Technology?
Great news for investors – Leoch International Technology is still trading at a fairly cheap price. 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 Leoch International Technology’s ratio of 3.34x is below its peer average of 12.76x, which suggests the stock is undervalued compared to the Electrical industry. What’s more interesting is that, Leoch International Technology’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 kind of growth will Leoch International Technology 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. Leoch International Technology’s earnings over the next few years are expected to increase by 59%, 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? Since 842 is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.