While NagaCorp Ltd. (HKG:3918) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$4.99 at one point, and dropping to the lows of HK$4.00. 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 NagaCorp's current trading price of HK$4.30 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at NagaCorp's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for NagaCorp
What's The Opportunity In NagaCorp?
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 NagaCorp's ratio of 17.67x is trading slightly above its industry peers' ratio of 17.66x, which means if you buy NagaCorp today, you'd be paying a relatively sensible price for it. And if you believe NagaCorp should be trading in this range, then there isn't really any room for the share price grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since NagaCorp'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 does the future of NagaCorp look like?
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 more than double over the next couple of years, the future seems bright for NagaCorp. 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? 3918's optimistic 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 3918? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you've been keeping tabs on 3918, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 3918, 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.
It can be quite valuable to consider what analysts expect for NagaCorp from their most recent forecasts. Luckily, you can check out what analysts are forecasting by clicking here.
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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.