Today we’re going to take a look at the well-established Techtronic Industries Company Limited (SEHK:669). The company’s stock saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine 669’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. View our latest analysis for Techtronic Industries
What is 669 worth?
The stock is currently trading at HK$44.35 on the share market, which means it is overvalued by 33% compared to my intrinsic value of HK$33.44. This means that the opportunity to buy 669 at a good price has disappeared! Another thing to keep in mind is that 669’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What does the future of 669 look like?
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. 669’s earnings over the next few years are expected to increase by 37.45%, 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? 669’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe 669 should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on 669 for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for 669, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.