Is There Now An Opportunity In Shangri-La Asia Limited (HKG:69)?

Shangri-La Asia Limited (HKG:69), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. 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. However, could the stock still be trading at a relatively cheap price? Let’s examine Shangri-La Asia’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Shangri-La Asia

Is Shangri-La Asia Still Cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 12.15% above my intrinsic value, which means if you buy Shangri-La Asia today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is HK$4.78, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, Shangri-La Asia’s low beta implies that the stock is less volatile than the wider market.

Can we expect growth from Shangri-La Asia?

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. Shangri-La Asia's 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? 69’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 69, 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 diving deeper into 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 Shangri-La Asia at this point in time. When we did our research, we found 2 warning signs for Shangri-La Asia (1 is concerning!) that we believe deserve your full attention.

If you are no longer interested in Shangri-La Asia, 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.