Is There Now An Opportunity In Li Ning Company Limited (HKG:2331)?

Li Ning Company Limited (HKG:2331) received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$81.00 at one point, and dropping to the lows of HK$55.60. 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 Li Ning's current trading price of HK$60.20 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Li Ning’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 Li Ning

What's The Opportunity In Li Ning?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 9.17% above my intrinsic value, which means if you buy Li Ning today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is HK$55.14, there’s only an insignificant downside when the price falls to its real value. What's more, Li Ning’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What does the future of Li Ning 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. With profit expected to grow by 80% over the next couple of years, the future seems bright for Li Ning. 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? 2331’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 2331, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 1 warning sign for Li Ning you should know about.

If you are no longer interested in Li Ning, 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.