Dongfeng Motor Group Company Limited (SEHK:489) saw significant share price volatility over the past couple of months on the SEHK, rising to the highs of HK$11.1 and falling to the lows of HK$9.42. 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 489’s current trading price of HK$9.42 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at 489’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 Dongfeng Motor Group
What’s the opportunity in 489?
Good news, investors! 489 is still a bargain right now. 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 5x is currently well-below the industry average of 12x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, 489’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 489 moves relative to the rest of the market.
Can we expect growth from 489?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with a relatively muted profit growth of 4.30% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for 489, at least in the short term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since 489 is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on 489 for a while, now might be the time to make a leap. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 489. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.