China Everbright Environment Group Limited (HKG:257), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the SEHK over the last few months. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock's share price. However, what if the stock is still a bargain? Let's take a look at China Everbright Environment Group's outlook and value based on the most recent financial data to see if the opportunity still exists.
What Is China Everbright Environment Group Worth?
The stock is currently trading at HK$2.96 on the share market, which means it is overvalued by 32% compared to our intrinsic value of HK$2.24. This means that the buying opportunity has probably disappeared for now. Another thing to keep in mind is that China Everbright Environment Group's share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it's there, it may be hard to fall back down into an attractive buying range again.
Can we expect growth from China Everbright Environment Group?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of China Everbright Environment Group, it is expected to deliver a relatively unexciting earnings growth of 8.5%, which doesn't help build up its investment thesis. Growth doesn't appear to be a main reason for a buy decision for the company, at least in the near term.
What This Means For You
Are you a shareholder? 257's future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe 257 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 257 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 means it's worth diving deeper into other factors in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing China Everbright Environment Group at this point in time. To help with this, we've discovered 2 warning signs (1 is a bit concerning!) that you ought to be aware of before buying any shares in China Everbright Environment Group.
If you are no longer interested in China Everbright Environment 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.