Is Now The Time To Look At Buying Shenzhen Investment Limited (HKG:604)?

Shenzhen Investment Limited (HKG:604), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. Less-covered, small caps sees 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.

See our latest analysis for Shenzhen Investment

What Is Shenzhen Investment Worth?

According to my valuation model, Shenzhen Investment seems to be fairly priced at around 3.10% above my intrinsic value, which means if you buy Shenzhen Investment today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth HK$1.34, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, Shenzhen Investment has a low beta, which suggests its share price is less volatile than the wider market.

Can we expect growth from Shenzhen Investment?

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. Shenzhen Investment's revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.

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 an eye 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Shenzhen Investment.

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.