While BOC Aviation Limited (HKG:2588) might not have the largest market cap around , it saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. While good news for shareholders, the company has traded much higher in the past year. 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? Let's examine BOC Aviation's valuation and outlook in more detail to determine if there's still a bargain opportunity.
Is BOC Aviation Still Cheap?
The stock seems fairly valued at the moment according to our valuation model. It's trading around 19.39% above our intrinsic value, which means if you buy BOC Aviation today, you'd be paying a relatively fair price for it. And if you believe that the stock is really worth HK$50.26, then there isn't really any room for the share price grow beyond what it's currently trading. Although, there may be an opportunity to buy in the future. This is because BOC Aviation'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.
Can we expect growth from BOC Aviation?
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. 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 profit expected to grow by a double-digit 14% over the next couple of years, the outlook is positive for BOC Aviation. 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? 2588's optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven't considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you've been keeping tabs on 2588, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it's worth diving deeper into other factors such as the strength of its balance sheet, 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 BOC Aviation at this point in time. For example, we've found that BOC Aviation has 2 warning signs (1 shouldn't be ignored!) that deserve your attention before going any further with your analysis.
If you are no longer interested in BOC Aviation, 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.