What Is Midea Real Estate Holding Limited's (HKG:3990) Share Price Doing?

While Midea Real Estate Holding Limited (HKG:3990) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase 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. However, what if the stock is still a bargain? Let’s take a look at Midea Real Estate Holding’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Midea Real Estate Holding

Is Midea Real Estate Holding Still Cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 14% below my intrinsic value, which means if you buy Midea Real Estate Holding today, you’d be paying a fair price for it. And if you believe the company’s true value is HK$13.75, then there isn’t much room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Midea Real Estate Holding’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 Midea Real Estate Holding look like?

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. However, with a negative profit growth of -4.3% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Midea Real Estate Holding. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Currently, 3990 appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on 3990 for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on 3990 should the price fluctuate below its true value.

If you want to dive deeper into Midea Real Estate Holding, you'd also look into what risks it is currently facing. When we did our research, we found 4 warning signs for Midea Real Estate Holding (1 is a bit concerning!) that we believe deserve your full attention.

If you are no longer interested in Midea Real Estate Holding, 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.