Is It Too Late To Consider Buying Datang International Power Generation Co., Ltd. (HKG:991)?

Datang International Power Generation Co., Ltd. (HKG:991), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the SEHK over the last few months. As a HK$53b market-cap stock, it seems odd Datang International Power Generation is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Today I will analyse the most recent data on Datang International Power Generation’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Datang International Power Generation

What's the opportunity in Datang International Power Generation?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 13.19% above my intrinsic value, which means if you buy Datang International Power Generation today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is HK$1.37, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Datang International Power Generation’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 Datang International Power Generation look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Datang International Power Generation's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger 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 991’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 track record of its management team. Have these factors changed since the last time you looked at the stock? 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 tabs on 991, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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.

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. When we did our research, we found 4 warning signs for Datang International Power Generation (1 shouldn't be ignored!) that we believe deserve your full attention.

If you are no longer interested in Datang International Power Generation, 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.