Why Shenzhen Investment Limited (HKG:604) Could Be Worth Watching

Shenzhen Investment Limited (HKG:604), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the SEHK over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. Less-covered, small caps tend to present 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 examine Shenzhen Investment’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Shenzhen Investment

What Is Shenzhen Investment Worth?

According to our valuation model, Shenzhen Investment seems to be fairly priced at around 13% below our 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$1.33, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, Shenzhen Investment’s low beta implies that the stock is less volatile than the wider market.

Can we expect growth from Shenzhen Investment?

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. With revenues expected to grow by 52% over the next couple of years, the future seems bright for Shenzhen Investment. If the level of expenses is able to be maintained, 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 604’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 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 optimal time to buy, given it is trading around its fair value. However, the optimistic prospect 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 can'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.