Is Now The Time To Look At Buying MGM China Holdings Limited (HKG:2282)?

MGM China Holdings Limited (HKG:2282), might not be a large cap stock, but it led the SEHK gainers with a relatively large price hike in the past couple of weeks. The company's trading levels have reached its high for the past year, following the recent bounce in the share price. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine MGM China Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for MGM China Holdings

What's The Opportunity In MGM China Holdings?

According to our valuation model, MGM China Holdings seems to be fairly priced at around 9.1% below our intrinsic value, which means if you buy MGM China Holdings today, you’d be paying a reasonable price for it. And if you believe the company’s true value is HK$16.39, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that MGM China Holdings’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of MGM China Holdings look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. MGM China Holdings' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? 2282’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 financial strength of the company. 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 2282, 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 further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about MGM China Holdings as a business, it's important to be aware of any risks it's facing. For example - MGM China Holdings has 2 warning signs we think you should be aware of.

If you are no longer interested in MGM China 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.