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Beijing Jingkelong Company Limited (HKG:814), which is in the consumer retailing business, and is based in China, saw a decent share price growth in the teens level on the SEHK over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Beijing Jingkelong’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for Beijing Jingkelong
Is Beijing Jingkelong still cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 12.33% above my intrinsic value, which means if you buy Beijing Jingkelong today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth HK$1.33, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since Beijing Jingkelong’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 Beijing Jingkelong generate?
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. Though in the case of Beijing Jingkelong, it is expected to deliver a relatively unexciting earnings growth of 2.2%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for Beijing Jingkelong, at least in the near term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in 814’s future outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on 814, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.