While Sinotrans Limited (HKG:598) might not have the largest market cap around , it led the SEHK gainers with a relatively large price hike in the past couple of weeks. The recent share price gains has brought the company back closer to its yearly peak. 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, could the stock still be trading at a relatively cheap price? Let's examine Sinotrans's valuation and outlook in more detail to determine if there's still a bargain opportunity.
What's The Opportunity In Sinotrans?
Good news, investors! Sinotrans is still a bargain right now. Our valuation model shows that the intrinsic value for the stock is HK$4.63, but it is currently trading at HK$3.33 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because Sinotrans's beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Sinotrans generate?
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. With profit expected to grow by a double-digit 19% over the next couple of years, the outlook is positive for Sinotrans. 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? Since 598 is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you've been keeping an eye on 598 for a while, now might be the time to enter the stock. Its buoyant future outlook isn't fully reflected in the current share price yet, which means it's not too late to buy 598. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.
So while earnings quality is important, it's equally important to consider the risks facing Sinotrans at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Sinotrans.
If you are no longer interested in Sinotrans, 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.