Is Now The Time To Look At Buying Xtep International Holdings Limited (HKG:1368)?

By
Simply Wall St
Published
January 14, 2022
SEHK:1368
Source: Shutterstock

While Xtep International Holdings Limited (HKG:1368) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the SEHK over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Xtep International Holdings’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Xtep International Holdings

Is Xtep International Holdings still cheap?

According to my valuation model, Xtep International Holdings seems to be fairly priced at around 7.17% above my intrinsic value, which means if you buy Xtep International Holdings today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is HK$12.07, then there isn’t really any room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Xtep International Holdings’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Xtep International Holdings?

earnings-and-revenue-growth
SEHK:1368 Earnings and Revenue Growth January 14th 2022

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Xtep International Holdings' earnings over the next few years are expected to increase by 83%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? 1368’s optimistic 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 track record of its management team. Have these factors changed since the last time you looked at the stock? 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 an eye on 1368, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining 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 Xtep International Holdings at this point in time. You'd be interested to know, that we found 2 warning signs for Xtep International Holdings and you'll want to know about these.

If you are no longer interested in Xtep International 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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