Should You Investigate SUNeVision Holdings Ltd. (HKG:1686) At HK$7.14?

By
Simply Wall St
Published
January 10, 2022
SEHK:1686
Source: Shutterstock

SUNeVision Holdings Ltd. (HKG:1686), might not be a large cap stock, but it saw a decent share price growth in the teens level on the SEHK over the last few months. 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 SUNeVision Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for SUNeVision Holdings

Is SUNeVision Holdings still cheap?

SUNeVision Holdings is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 36.79x is currently well-above the industry average of 12.1x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, SUNeVision Holdings’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 levels around its industry peers, 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 SUNeVision Holdings?

earnings-and-revenue-growth
SEHK:1686 Earnings and Revenue Growth January 10th 2022

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. SUNeVision Holdings' earnings over the next few years are expected to increase by 66%, 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? 1686’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe 1686 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio 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 1686 for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for 1686, 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. Be aware that SUNeVision Holdings is showing 3 warning signs in our investment analysis and 2 of those don't sit too well with us...

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