Let's talk about the popular Tianqi Lithium Corporation (SZSE:002466). The company's shares saw a decent share price growth of 13% on the SZSE over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock's share price. But what if there is still an opportunity to buy? Today we will analyse the most recent data on Tianqi Lithium's outlook and valuation to see if the opportunity still exists.
What's The Opportunity In Tianqi Lithium?
According to our valuation model, Tianqi Lithium seems to be fairly priced at around 19% below our intrinsic value, which means if you buy Tianqi Lithium today, you'd be paying a reasonable price for it. And if you believe the company's true value is CN¥57.90, then there's not much of an upside to gain from mispricing. Furthermore, Tianqi Lithium's low beta implies that the stock is less volatile than the wider market.
What does the future of Tianqi Lithium 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. Though in the case of Tianqi Lithium, it is expected to deliver a highly negative earnings growth in the next few years, which doesn't help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? Currently, 002466 appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you've been keeping tabs on 002466 for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there's less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven't considered today, which can help gel your views on 002466 should the price fluctuate below its true value.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To that end, you should learn about the 3 warning signs we've spotted with Tianqi Lithium (including 1 which makes us a bit uncomfortable).
If you are no longer interested in Tianqi Lithium, 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.