What Does Shenzhen Investment Limited's (HKG:604) Share Price Indicate?

Shenzhen Investment Limited (HKG:604), might not be a large cap stock, but it saw a decent share price growth in the teens level on the SEHK over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at Shenzhen Investment’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Shenzhen Investment

Is Shenzhen Investment Still Cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 17% below my intrinsic value, which means if you buy Shenzhen Investment today, you’d be paying a reasonable price for it. And if you believe the company’s true value is HK$1.64, then there isn’t much room for the share price grow beyond what it’s currently trading. In addition to this, Shenzhen Investment has a low beta, which suggests its share price is less volatile than the wider market.

What does the future of Shenzhen Investment 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. In the upcoming year, Shenzhen Investment's earnings are expected to increase by 93%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? 604’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 conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on 604, 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.

If you want to dive deeper into Shenzhen Investment, you'd also look into what risks it is currently facing. When we did our research, we found 3 warning signs for Shenzhen Investment (2 shouldn't be ignored!) that we believe deserve your full attention.

If you are no longer interested in Shenzhen Investment, 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.