At HK$2.45, Is BAIC Motor Corporation Limited (HKG:1958) Worth Looking At Closely?

BAIC Motor Corporation Limited (HKG:1958), might not be a large cap stock, but it led the SEHK gainers with a relatively large price hike in the past couple of weeks. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine BAIC Motor’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for BAIC Motor

What's The Opportunity In BAIC Motor?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 3.86x is currently trading slightly below its industry peers’ ratio of 8.82x, which means if you buy BAIC Motor today, you’d be paying a reasonable price for it. And if you believe that BAIC Motor should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, it seems like BAIC Motor’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of BAIC Motor 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. Though in the case of BAIC Motor, it is expected to deliver a relatively unexciting earnings growth of 3.9%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What This Means For You

Are you a shareholder? 1958’s future growth appears to have been factored into the current share price, with shares trading around industry price multiples. 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 1958? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on 1958, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about BAIC Motor as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 1 warning sign for BAIC Motor you should be aware of.

If you are no longer interested in BAIC Motor, 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.