Dongfeng Motor Group Company Limited (HKG:489), is not the largest company out there, but it saw significant share price movement during recent months on the SEHK, rising to highs of HK$4.03 and falling to the lows of HK$3.01. 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 Dongfeng Motor Group's current trading price of HK$3.15 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 Dongfeng Motor Group's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What Is Dongfeng Motor Group Worth?
Good news, investors! Dongfeng Motor Group is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. We've used the price-to-earnings ratio in this instance because there's not enough visibility to forecast its cash flows. The stock's ratio of 3.98x is currently well-below the industry average of 11.15x, meaning that it is trading at a cheaper price relative to its peers. However, given that Dongfeng Motor Group'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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Dongfeng Motor Group?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Dongfeng Motor Group, at least in the near future.
What This Means For You
Are you a shareholder? Although 489 is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to 489, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you've been keeping an eye on 489 for a while, but hesitant on making the leap, we recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Be aware that Dongfeng Motor Group is showing 4 warning signs in our investment analysis and 1 of those is significant...
If you are no longer interested in Dongfeng Motor Group, 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.