In This Article:
Weichai Power Co Ltd (HKG:2338), which is in the machinery business, and is based in China, saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Weichai Power’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for Weichai Power
Is Weichai Power still cheap?
Great news for investors – Weichai Power is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is HK$15.78, but it is currently trading at CN¥9.12 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, Weichai Power’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.
Can we expect growth from Weichai Power?
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 over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Weichai Power, at least in the near future.
What this means for you:
Are you a shareholder? Although 2338 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 2338, 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 2338 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Weichai Power. You can find everything you need to know about Weichai Power in the latest infographic research report. If you are no longer interested in Weichai Power, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.