At HK$11.76, Is It Time To Put Shanghai Industrial Holdings Limited (HKG:363) On Your Watch List?

Shanghai Industrial Holdings Limited (HKG:363), is not the largest company out there, but it saw a decent share price growth in the teens level on the SEHK over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Shanghai Industrial Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Shanghai Industrial Holdings

What's The Opportunity In Shanghai Industrial Holdings?

According to my valuation model, Shanghai Industrial Holdings seems to be fairly priced at around 10% below my intrinsic value, which means if you buy Shanghai Industrial Holdings today, you’d be paying a reasonable price for it. And if you believe the company’s true value is HK$13.09, then there’s not much of an upside to gain from mispricing. Furthermore, Shanghai Industrial Holdings’s low beta implies that the stock is less volatile than the wider market.

What kind of growth will Shanghai Industrial Holdings generate?

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 revenues expected to grow by a double-digit 20% over the next couple of years, the outlook is positive for Shanghai Industrial Holdings. If the level of expenses is able to be maintained, 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 already priced in 363’s positive outlook, with shares trading around its fair value. 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on 363, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, 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 Shanghai Industrial Holdings at this point in time. Be aware that Shanghai Industrial Holdings is showing 2 warning signs in our investment analysis and 1 of those is significant...

If you are no longer interested in Shanghai Industrial 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.