Why Plover Bay Technologies Limited (HKG:1523) Could Be Worth Watching

Plover Bay Technologies Limited (HKG:1523), might not be a large cap stock, but it saw significant share price movement during recent months on the SEHK, rising to highs of HK$4.56 and falling to the lows of HK$3.33. 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 Plover Bay Technologies' current trading price of HK$3.33 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 Plover Bay Technologies’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Plover Bay Technologies

What's the opportunity in Plover Bay Technologies?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Plover Bay Technologies’s ratio of 21.96x is above its peer average of 15.33x, which suggests the stock is trading at a higher price compared to the Communications industry. Another thing to keep in mind is that Plover Bay Technologies’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.

What does the future of Plover Bay Technologies look like?

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. With profit expected to grow by 64% over the next couple of years, the future seems bright for Plover Bay Technologies. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? 1523’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 1523 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 1523 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 optimistic prospect is encouraging for 1523, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Plover Bay Technologies as a business, it's important to be aware of any risks it's facing. For example, Plover Bay Technologies has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

If you are no longer interested in Plover Bay Technologies, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.