Why Johnson Electric Holdings Limited (HKG:179) Could Be Worth Watching

Johnson Electric Holdings Limited (HKG:179), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$16.70 at one point, and dropping to the lows of HK$10.12. 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 Johnson Electric Holdings' current trading price of HK$10.20 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Johnson Electric Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Johnson Electric Holdings

Is Johnson Electric Holdings still cheap?

According to my valuation model, the stock is currently overvalued by about 36%, trading at HK$10.20 compared to my intrinsic value of HK$7.48. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Given that Johnson Electric 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.

Can we expect growth from Johnson Electric Holdings?

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. With profit expected to grow by 43% over the next couple of years, the future seems bright for Johnson Electric Holdings. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in 179’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe 179 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 179 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 179, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Johnson Electric Holdings, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 2 warning signs with Johnson Electric Holdings, and understanding them should be part of your investment process.

If you are no longer interested in Johnson Electric 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.