China Modern Dairy Holdings Ltd. (HKG:1117), might not be a large cap stock, but it saw a decent share price growth in the teens level on the SEHK over the last few months. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock's share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on China Modern Dairy Holdings's outlook and valuation to see if the opportunity still exists.

View our latest analysis for China Modern Dairy Holdings

Is China Modern Dairy Holdings still cheap?

The stock seems fairly valued at the moment according to my valuation model. It's trading around 7.12% above my intrinsic value, which means if you buy China Modern Dairy Holdings today, you'd be paying a relatively fair price for it. And if you believe that the stock is really worth HK$1.08, there's only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since China Modern Dairy Holdings's share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will China Modern Dairy Holdings generate?

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 98% over the next couple of years, the future seems bright for China Modern Dairy Holdings. 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? 1117's optimistic future growth appears to have been factored into the current share price, 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 tabs on 1117, now may not be the most optimal 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 further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 3 warning signs with China Modern Dairy Holdings, and understanding them should be part of your investment process.

If you are no longer interested in China Modern Dairy Holdings, 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.