What Is Red Star Macalline Group Corporation Ltd.'s (HKG:1528) Share Price Doing?

Red Star Macalline Group Corporation Ltd. (HKG:1528), is not the largest company out there, but it received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$5.56 at one point, and dropping to the lows of HK$4.53. 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 Red Star Macalline Group's current trading price of HK$4.59 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.

See our latest analysis for Red Star Macalline Group

What is Red Star Macalline Group worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 6.92x is currently trading slightly below its industry peers’ ratio of 8.69x, which means if you buy Red Star Macalline Group today, you’d be paying a decent 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 to grow beyond the levels of other industry peers over the long-term. 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 kind of growth will Red Star Macalline Group generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 more than double over the next couple of years, the future seems bright for Red Star Macalline Group. 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? 1528’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. 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 confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on 1528, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 1528, 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.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Our analysis shows 4 warning signs for Red Star Macalline Group (1 shouldn't be ignored!) and we strongly recommend you look at them before investing.

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This article by Simply Wall St is general in nature. 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.
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