Cowell e Holdings Inc (HKG:1415), a electronic company based in China, received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$2.17 at one point, and dropping to the lows of HK$1.33. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Cowell e Holdings’s current trading price of HK$1.38 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 Cowell e Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Cowell e Holdings still cheap?The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 9.17x is currently trading slightly below its industry peers’ ratio of 10.53x, which means if you buy Cowell e Holdings today, you’d be paying a reasonable price for it. And if you believe Cowell e Holdings should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. Is there another opportunity to buy low in the future? Since Cowell e Holdings’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Cowell e Holdings?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. Cowell e Holdings’s earnings over the next few years are expected to increase by 82.97%, 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 1415’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 financial strength of the company. Have these factors changed since the last time you looked at 1415? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on 1415, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for 1415, 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Cowell e Holdings. You can find everything you need to know about Cowell e Holdings in the latest infographic research report. If you are no longer interested in Cowell e Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.