Goertek Inc. (SZSE:002241), is not the largest company out there, but it received a lot of attention from a substantial price increase on the SZSE over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company's outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Goertek's outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for Goertek
What's The Opportunity In Goertek?
The stock is currently trading at CN¥18.60 on the share market, which means it is overvalued by 24% compared to my intrinsic value of CN¥14.99. Not the best news for investors looking to buy! If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Goertek's share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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 Goertek 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 revenues expected to grow by 34% over the next couple of years, the future seems bright for Goertek. If the level of expenses is able to be maintained, 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? It seems like the market has well and truly priced in 002241's positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe 002241 should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you've been keeping tabs on 002241 for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there's no upside from mispricing. However, the positive outlook is encouraging for 002241, which means 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 Goertek, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 1 warning sign with Goertek, and understanding it should be part of your investment process.
If you are no longer interested in Goertek, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.