At HK$19.86, Is Yue Yuen Industrial (Holdings) Limited (HKG:551) Worth Looking At Closely?

Yue Yuen Industrial (Holdings) Limited (HKG:551), is not the largest company out there, but 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. However, what if the stock is still a bargain? Let’s examine Yue Yuen Industrial (Holdings)’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Yue Yuen Industrial (Holdings)

What's the opportunity in Yue Yuen Industrial (Holdings)?

Good news, investors! Yue Yuen Industrial (Holdings) is still a bargain right now. According to my valuation, the intrinsic value for the stock is HK$25.38, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, Yue Yuen Industrial (Holdings)’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Yue Yuen Industrial (Holdings) generate?

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. 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. In Yue Yuen Industrial (Holdings)'s case, its revenues over the next few years are expected to grow by 40%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since 551 is currently undervalued, it may be a great time to accumulate more of 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 undervaluation.

Are you a potential investor? If you’ve been keeping an eye on 551 for a while, now might be the time to enter the stock. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 551. 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 buy.

So while earnings quality is important, it's equally important to consider the risks facing Yue Yuen Industrial (Holdings) at this point in time. Case in point: We've spotted 1 warning sign for Yue Yuen Industrial (Holdings) you should be aware of.

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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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