ASM Pacific Technology Limited (HKG:522), 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. 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 take a look at ASM Pacific Technology’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What's the opportunity in ASM Pacific Technology?
According to my valuation model, ASM Pacific Technology seems to be fairly priced at around 20% below my intrinsic value, which means if you buy ASM Pacific Technology today, you’d be paying a fair price for it. And if you believe the company’s true value is HK$105.96, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because ASM Pacific Technology’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of ASM Pacific Technology look like?
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. However, with a relatively muted profit growth of 5.6% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for ASM Pacific Technology, at least in the short term.
What this means for you:
Are you a shareholder? 522’s future growth appears to have been factored into the current share price, 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 522, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook 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.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, we've found that ASM Pacific Technology has 2 warning signs (1 is concerning!) that deserve your attention before going any further with your analysis.
If you are no longer interested in ASM Pacific Technology, 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.