Is Now An Opportune Moment To Examine Zhejiang Dahua Technology Co., Ltd. (SZSE:002236)?

Zhejiang Dahua Technology Co., Ltd. (SZSE:002236), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the SZSE over the last few months, increasing to CN¥20.98 at one point, and dropping to the lows of CN¥16.79. 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 Zhejiang Dahua Technology's current trading price of CN¥17.80 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 Zhejiang Dahua 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 Zhejiang Dahua Technology

What's The Opportunity In Zhejiang Dahua Technology?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 11% below our intrinsic value, which means if you buy Zhejiang Dahua Technology today, you’d be paying a fair price for it. And if you believe that the stock is really worth CN¥19.91, then there isn’t much room for the share price grow beyond what it’s currently trading. What's more, Zhejiang Dahua Technology’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What kind of growth will Zhejiang Dahua Technology 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 Zhejiang Dahua Technology, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Currently, 002236 appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on 002236 for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on 002236 should the price fluctuate below its true value.

If you'd like to know more about Zhejiang Dahua Technology as a business, it's important to be aware of any risks it's facing. Our analysis shows 2 warning signs for Zhejiang Dahua Technology (1 doesn't sit too well with us!) and we strongly recommend you look at these before investing.

If you are no longer interested in Zhejiang Dahua 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.