Why Hongfa Technology Co., Ltd. (SHSE:600885) Could Be Worth Watching

Hongfa Technology Co., Ltd. (SHSE:600885), is not the largest company out there, but it received a lot of attention from a substantial price movement on the SHSE over the last few months, increasing to CN¥30.20 at one point, and dropping to the lows of CN¥26.20. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Hongfa Technology's current trading price of CN¥26.20 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Hongfa Technology’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 Hongfa Technology

What's The Opportunity In Hongfa Technology?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 5.4% below our intrinsic value, which means if you buy Hongfa Technology today, you’d be paying a reasonable price for it. And if you believe the company’s true value is CN¥27.69, then there isn’t much room for the share price grow beyond what it’s currently trading. In addition to this, Hongfa Technology has a low beta, which suggests its share price is less volatile than the wider market.

What kind of growth will Hongfa Technology generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Hongfa Technology's earnings over the next few years are expected to increase by 37%, 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? 600885’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 an eye on 600885, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook 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.

If you'd like to know more about Hongfa Technology as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Hongfa Technology, and understanding this should be part of your investment process.

If you are no longer interested in Hongfa Technology, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com