Is Now The Time To Look At Buying China Jinmao Holdings Group Limited (HKG:817)?

China Jinmao Holdings Group Limited (HKG:817), might not be a large cap stock, but it led the SEHK gainers with a relatively large price hike in the past couple of weeks. 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 examine China Jinmao Holdings Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for China Jinmao Holdings Group

What Is China Jinmao Holdings 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. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that China Jinmao Holdings Group’s ratio of 7.41x is trading slightly above its industry peers’ ratio of 6.61x, which means if you buy China Jinmao Holdings Group today, you’d be paying a relatively reasonable price for it. And if you believe that China Jinmao Holdings Group should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, it seems like China Jinmao Holdings Group’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will China Jinmao Holdings Group generate?

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. China Jinmao Holdings Group's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? 817’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 track record of its management team. Have these factors changed since the last time you looked at 817? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on 817, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 817, 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.

So while earnings quality is important, it's equally important to consider the risks facing China Jinmao Holdings Group at this point in time. Case in point: We've spotted 5 warning signs for China Jinmao Holdings Group you should be mindful of and 1 of these makes us a bit uncomfortable.

If you are no longer interested in China Jinmao Holdings Group, 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.