PAX Global Technology Limited (HKG:327), which is in the electronic business, and is based in Hong Kong, received a lot of attention from a substantial price increase on the SEHK over the last few months. As a small cap stock, which tends to lack high analyst coverage, 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 take a look at PAX Global Technology’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for PAX Global Technology

What's the opportunity in PAX Global Technology?

According to my valuation model, PAX Global Technology seems to be fairly priced at around 6.68% above my intrinsic value, which means if you buy PAX Global Technology today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is HK$3.82, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that PAX Global Technology’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.

Can we expect growth from PAX Global Technology?

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. PAX Global Technology’s earnings over the next few years are expected to increase by 25%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? 327’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on 327, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which 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.