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Comtec Solar Systems Group Limited (SEHK:712), a semiconductor company based in China, received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$0.28 at one point, and dropping to the lows of HK$0.17. 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 Comtec Solar Systems Group’s current trading price of HK$0.18 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 Comtec Solar Systems Group’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 Comtec Solar Systems Group
Is Comtec Solar Systems Group still cheap?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-book (PB) ratio given that there is not enough information to reliably forecast the stock’s cash flows, and its earnings doesn’t seem to reflect its true value. I find that Comtec Solar Systems Group’s ratio of 1.19x is trading slightly below its industry peers’ ratio of 2.13x, which means if you buy Comtec Solar Systems Group today, you’d be paying a relatively reasonable price for it. And if you believe that Comtec Solar Systems Group should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Comtec Solar Systems Group’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 Comtec Solar Systems Group 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. Comtec Solar Systems Group’s earnings over the next few years are expected to increase by 94.25%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.