China Resources Medical Holdings Company Limited (HKG:1515), which is in the healthcare business, and is based in China, received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$7.18 at one point, and dropping to the lows of HK$4.74. 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 China Resources Medical Holdings’s current trading price of HK$4.82 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at China Resources Medical Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is China Resources Medical Holdings still cheap?The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 18.13x is currently trading slightly below its industry peers’ ratio of 21.03x, which means if you buy China Resources Medical Holdings today, you’d be paying a reasonable price for it. And if you believe China Resources Medical Holdings should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. Although, there may be an opportunity to buy in the future. This is because China Resources Medical 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.
What kind of growth will China Resources Medical Holdings generate?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 65% over the next couple of years, the future seems bright for China Resources Medical Holdings. 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? It seems like the market has already priced in 1515’s positive outlook, 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 1515? Will you have enough conviction to buy should the price fluctuate below the true value?
Are you a potential investor? If you’ve been keeping an eye on 1515, 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 1515, 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on China Resources Medical Holdings. You can find everything you need to know about China Resources Medical Holdings in the latest infographic research report. If you are no longer interested in China Resources Medical Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.