Vtech Holdings Limited (HKG:303), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. As a well-established company, which tends to be well-covered by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Vtech Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.
See our latest analysis for Vtech Holdings
Is Vtech Holdings still cheap?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio 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 11.02x is currently trading slightly below its industry peers’ ratio of 12.18x, which means if you buy Vtech Holdings today, you’d be paying a decent price for it. And if you believe that Vtech Holdings should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, Vtech Holdings’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What kind of growth will Vtech Holdings generate?
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. However, with a relatively muted profit growth of 4.8% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Vtech Holdings, at least in the short term.
What this means for you:
Are you a shareholder? 303’s future growth appears to have been factored into the current share price, with shares trading around industry price multiples. 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 303? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on 303, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean 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. Case in point: We've spotted 1 warning sign for Vtech Holdings you should be aware of.
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This article by Simply Wall St is general in nature. 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.
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About SEHK:303
Vtech Holdings
Designs, manufactures, and distributes electronic products in Hong Kong, North America, Europe, the Asia Pacific, and internationally.
Flawless balance sheet and good value.
