Is There Now An Opportunity In China Yongda Automobiles Services Holdings Limited (HKG:3669)?

While China Yongda Automobiles Services Holdings Limited (HKG:3669) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the SEHK. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine China Yongda Automobiles Services Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for China Yongda Automobiles Services Holdings

What is China Yongda Automobiles Services Holdings worth?

China Yongda Automobiles Services Holdings appears to be overvalued by 22% at the moment, based on my discounted cash flow valuation. The stock is currently priced at HK$16.16 on the market compared to my intrinsic value of HK$13.26. Not the best news for investors looking to buy! But, is there another opportunity to buy low in the future? Given that China Yongda Automobiles Services Holdings’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from China Yongda Automobiles Services Holdings?

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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. China Yongda Automobiles Services Holdings' earnings over the next few years are expected to increase by 96%, 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? It seems like the market has well and truly priced in 3669’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe 3669 should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on 3669 for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for 3669, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 2 warning signs with China Yongda Automobiles Services Holdings, and understanding them should be part of your investment process.

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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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