Is It Too Late To Consider Buying Hyundai Green Food Co.,Ltd. (KRX:005440)?

Hyundai Green Food Co.,Ltd. (KRX:005440), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the KOSE. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on Hyundai Green FoodLtd’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Hyundai Green FoodLtd

What's the opportunity in Hyundai Green FoodLtd?

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. 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 Hyundai Green FoodLtd’s ratio of 18.5x is trading slightly above its industry peers’ ratio of 17.41x, which means if you buy Hyundai Green FoodLtd today, you’d be paying a relatively reasonable price for it. And if you believe that Hyundai Green FoodLtd should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, it seems like Hyundai Green FoodLtd’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Hyundai Green FoodLtd?

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. 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. Though in the case of Hyundai Green FoodLtd, it is expected to deliver a relatively unexciting top-line growth of 4.5% in the next few years, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? It seems like the market has already priced in A005440’s growth outlook, with shares trading around industry price multiples. 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 A005440? Will you have enough conviction to buy should the price fluctuate below the the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on A005440, now may not be the most advantageous 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.

If you want to dive deeper into Hyundai Green FoodLtd, you'd also look into what risks it is currently facing. When we did our research, we found 3 warning signs for Hyundai Green FoodLtd (1 makes us a bit uncomfortable!) that we believe deserve your full attention.

If you are no longer interested in Hyundai Green FoodLtd, 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. 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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