When Should You Buy TK Group (Holdings) Limited (HKG:2283)?

While TK Group (Holdings) Limited (HKG:2283) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$3.50 at one point, and dropping to the lows of HK$2.65. 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 TK Group (Holdings)'s current trading price of HK$2.65 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 TK Group (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 TK Group (Holdings)

What's the opportunity in TK Group (Holdings)?

Great news for investors – TK Group (Holdings) is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to 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 TK Group (Holdings)’s ratio of 10.5x is below its peer average of 16.2x, which indicates the stock is trading at a lower price compared to the Machinery industry. Another thing to keep in mind is that TK Group (Holdings)’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

Can we expect growth from TK Group (Holdings)?

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. With profit expected to more than double over the next couple of years, the future seems bright for TK Group (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? Since 2283 is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on 2283 for a while, now might be the time to enter the stock. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 2283. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

If you'd like to know more about TK Group (Holdings) as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 2 warning signs for TK Group (Holdings) you should know about.

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This article by Simply Wall St is general in nature. 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.
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