Why Xinyi Glass Holdings Limited (HKG:868) Could Be Worth Watching

Xinyi Glass Holdings Limited (HKG:868), is not the largest company out there, but it saw significant share price movement during recent months on the SEHK, rising to highs of HK$20.35 and falling to the lows of HK$16.14. 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 Xinyi Glass Holdings' current trading price of HK$16.14 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Xinyi Glass Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Xinyi Glass Holdings

What is Xinyi Glass Holdings worth?

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 5.57x is currently trading slightly below its industry peers’ ratio of 8.84x, which means if you buy Xinyi Glass Holdings today, you’d be paying a reasonable price for it. And if you believe that Xinyi Glass Holdings 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. In addition to this, it seems like Xinyi Glass Holdings’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Xinyi Glass Holdings look like?

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. Though in the case of Xinyi Glass Holdings, it is expected to deliver a negative earnings growth of -7.3%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? 868 seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on 868, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on 868 for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on 868 should the price fluctuate below the industry PE ratio.

So while earnings quality is important, it's equally important to consider the risks facing Xinyi Glass Holdings at this point in time. For example, Xinyi Glass Holdings has 2 warning signs (and 1 which is concerning) we think you should know about.

If you are no longer interested in Xinyi Glass 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.