Yahoo Finance At HK$027.8, Is It Time To Buy China Mengniu Dairy Company Limited (HKG:2319)?
Today we’re going to take a look at the well-established China Mengniu Dairy Company Limited (HKG:2319). The company’s stock saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. 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. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on China Mengniu Dairy’s outlook and valuation to see if the opportunity still exists. See our latest analysis for China Mengniu Dairy
What is China Mengniu Dairy worth?
China Mengniu Dairy appears to be overvalued by 34.5% at the moment, based on my discounted cash flow valuation. The stock is currently priced at HK$27.80 on the market compared to my intrinsic value of HK$20.67. This means that the opportunity to buy China Mengniu Dairy at a good price has disappeared! Another thing to keep in mind is that China Mengniu Dairy’s share price is quite stable relative to the rest of 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 Mengniu Dairy?
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. China Mengniu Dairy’s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? 2319’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe 2319 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 2319 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 is encouraging for 2319, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on China Mengniu Dairy. You can find everything you need to know about China Mengniu Dairy in the latest infographic research report. If you are no longer interested in China Mengniu Dairy, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
