Bank of Chongqing Co., Ltd. (HKG:1963), operating in the financial services industry based in China, saw significant share price movement during recent months on the SEHK, rising to highs of HK$4.85 and falling to the lows of HK$4.32. 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 Bank of Chongqing’s current trading price of HK$4.49 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 Bank of Chongqing’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Bank of Chongqing still cheap?The stock seems fairly valued at the moment according to my relative valuation model. 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 3.27x is currently trading slightly below its industry peers’ ratio of 5.97x, which means if you buy Bank of Chongqing today, you’d be paying a reasonable price for it. And if you believe Bank of Chongqing should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. So, is there another chance to buy low in the future? Given that Bank of Chongqing’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Bank of Chongqing 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 Bank of Chongqing, it is expected to deliver a relatively unexciting earnings growth of 8.1%, 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? 1963’s 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 financial strength of the company. Have these factors changed since the last time you looked at 1963? 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 tabs on 1963, now may not be the most optimal time to buy, given it is trading around its fair value. 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Bank of Chongqing. You can find everything you need to know about Bank of Chongqing in the latest infographic research report. If you are no longer interested in Bank of Chongqing, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.