Red Star Macalline Group Corporation Ltd (HKG:1528), a real estate company based in China, saw significant share price volatility over the past couple of months on the SEHK, rising to the highs of HK$11.38 and falling to the lows of HK$8.68. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Red Star Macalline Group’s current trading price of HK$8.83 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Red Star Macalline Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Red Star Macalline Group worth?According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Red Star Macalline Group’s ratio of 6.51x is trading slightly below its industry peers’ ratio of 6.53x, which means if you buy Red Star Macalline Group today, you’d be paying a reasonable price for it. And if you believe Red Star Macalline Group 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 Red Star Macalline Group’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 does the future of Red Star Macalline Group 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. However, with a relatively muted profit growth of 2.72% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Red Star Macalline Group, at least in the short term.
What this means for you:
Are you a shareholder? 1528’s 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 1528? 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 tabs on 1528, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive growth outlook may mean it’s worth diving deeper into other factors 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 Red Star Macalline Group. You can find everything you need to know about Red Star Macalline Group in the latest infographic research report. If you are no longer interested in Red Star Macalline Group, 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 firstname.lastname@example.org.