Should You Investigate GOME Retail Holdings Limited (HKG:493) At HK$0.79?

GOME Retail Holdings Limited (HKG:493), which is in the specialty retail business, and is based in Hong Kong, 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, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on GOME Retail Holdings’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for GOME Retail Holdings

Is GOME Retail Holdings still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 12.29% above my intrinsic value, which means if you buy GOME Retail Holdings today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth HK$0.70, then there isn’t really any room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that GOME Retail Holdings’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 GOME Retail Holdings?

SEHK:493 Past and Future Earnings, January 24th 2020
SEHK:493 Past and Future Earnings, January 24th 2020

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. GOME Retail Holdings’s earnings over the next few years are expected to increase by 87%, 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? 493’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 493, 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 diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on GOME Retail Holdings. You can find everything you need to know about GOME Retail Holdings in the latest infographic research report. If you are no longer interested in GOME Retail Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.