Is KHVATEC Co., Ltd. (KOSDAQ:060720) Potentially Undervalued?

KHVATEC Co., Ltd. (KOSDAQ:060720), is not the largest company out there, but it saw significant share price movement during recent months on the KOSDAQ, rising to highs of ₩23,200 and falling to the lows of ₩16,600. 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 KHVATEC's current trading price of ₩17,800 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 KHVATEC’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 KHVATEC

Is KHVATEC still cheap?

According to my valuation model, KHVATEC seems to be fairly priced at around 14.49% above my intrinsic value, which means if you buy KHVATEC today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is ₩15547.48, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that KHVATEC’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will KHVATEC 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. 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. In KHVATEC's case, its revenues over the next couple of years are expected to double, indicating an incredibly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth 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 A060720’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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on A060720, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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.

So while earnings quality is important, it's equally important to consider the risks facing KHVATEC at this point in time. Our analysis shows 3 warning signs for KHVATEC (1 is potentially serious!) and we strongly recommend you look at them before investing.

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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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