Is Logan Group Company Limited (HKG:3380) Potentially Undervalued?

Logan Group Company Limited (HKG:3380), 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. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s take a look at Logan Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Logan Group

Is Logan Group still cheap?

According to my valuation model, Logan Group seems to be fairly priced at around 16% below my intrinsic value, which means if you buy Logan Group today, you’d be paying a fair price for it. And if you believe that the stock is really worth HK$14.90, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, Logan Group’s low beta implies that the stock is less volatile than the wider market.

Can we expect growth from Logan Group?

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. Logan Group's earnings over the next few years are expected to increase by 49%, 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? 3380’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 financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on 3380, 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 further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Logan Group at this point in time. Our analysis shows 2 warning signs for Logan Group (1 is a bit unpleasant!) and we strongly recommend you look at these 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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