Stock Analysis

What Is Pentamaster International Limited's (HKG:1665) Share Price Doing?

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SEHK:1665
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While Pentamaster International Limited (HKG:1665) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the SEHK, rising to highs of HK$2.05 and falling to the lows of HK$1.79. 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 Pentamaster International's current trading price of HK$1.82 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Pentamaster International’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Pentamaster International

What's the opportunity in Pentamaster International?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 2.2% below my intrinsic value, which means if you buy Pentamaster International today, you’d be paying a fair price for it. And if you believe the company’s true value is HK$1.86, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Pentamaster International’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Pentamaster International generate?

earnings-and-revenue-growth
SEHK:1665 Earnings and Revenue Growth November 24th 2020

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Pentamaster International's earnings over the next few years are expected to increase by 58%, 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 already priced in 1665’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 tabs on 1665, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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.

If you want to dive deeper into Pentamaster International, you'd also look into what risks it is currently facing. For example, Pentamaster International has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

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