Is It Time To Consider Buying Geely Automobile Holdings Limited (HKG:175)?

Geely Automobile Holdings Limited (HKG:175) saw significant share price movement during recent months on the SEHK, rising to highs of HK$11.26 and falling to the lows of HK$9.01. 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 Geely Automobile Holdings' current trading price of HK$9.46 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Geely Automobile Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Geely Automobile Holdings

What Is Geely Automobile Holdings Worth?

Geely Automobile Holdings appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Geely Automobile Holdings’s ratio of 17.27x is above its peer average of 10.77x, which suggests the stock is trading at a higher price compared to the Auto industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Geely Automobile 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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Geely Automobile Holdings look like?

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. Geely Automobile Holdings' earnings over the next few years are expected to increase by 76%, 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? 175’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe 175 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 175 for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for 175, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Geely Automobile Holdings at this point in time. At Simply Wall St, we found 1 warning sign for Geely Automobile Holdings and we think they deserve your attention.

If you are no longer interested in Geely Automobile Holdings, 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.