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Sky Light Holdings Limited (HKG:3882), which is in the consumer durables business, and is based in China, received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$0.39 at one point, and dropping to the lows of HK$0.26. 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 Sky Light Holdings's current trading price of HK$0.28 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 Sky Light Holdings’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 Sky Light Holdings
Is Sky Light Holdings still cheap?
Great news for investors – Sky Light Holdings 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 Sky Light Holdings’s ratio of 1.88x is below its peer average of 11.42x, which suggests the stock is undervalued compared to the Consumer Durables industry. Sky Light Holdings’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What kind of growth will Sky Light Holdings generate?
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. However, with an extremely negative double-digit change in profit expected next year, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Sky Light Holdings, at least in the near future.
What this means for you:
Are you a shareholder? Although 3882 is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to 3882, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on 3882 for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.