What Does Shenzhen Investment Limited's (HKG:604) Share Price Indicate?

While Shenzhen Investment Limited (HKG:604) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$2.40 at one point, and dropping to the lows of HK$1.89. 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 Shenzhen Investment's current trading price of HK$2.01 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 Shenzhen Investment’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Shenzhen Investment

What's the opportunity in Shenzhen Investment?

Great news for investors – Shenzhen Investment is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is HK$2.89, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. Shenzhen Investment’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

Can we expect growth from Shenzhen Investment?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of Shenzhen Investment, it is expected to deliver a relatively unexciting earnings growth of 6.1%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since 604 is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on 604 for a while, now might be the time to make a leap. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 604. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.

If you want to dive deeper into Shenzhen Investment, you'd also look into what risks it is currently facing. Be aware that Shenzhen Investment is showing 3 warning signs in our investment analysis and 1 of those is concerning...

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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.