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Have Investors Priced In China Display Optoelectronics Technology Holdings Limited’s (HKG:334) Growth?

China Display Optoelectronics Technology Holdings Limited (HKG:334), a tech company based in China, saw significant share price volatility over the past couple of months on the SEHK, rising to the highs of HK$0.83 and falling to the lows of HK$0.46. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether China Display Optoelectronics Technology Holdings’s current trading price of HK$0.48 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at China Display Optoelectronics Technology Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for China Display Optoelectronics Technology Holdings

What is China Display Optoelectronics Technology Holdings worth?

The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 7.27x is currently trading slightly below its industry peers’ ratio of 10.45x, which means if you buy China Display Optoelectronics Technology Holdings today, you’d be paying a reasonable price for it. And if you believe that China Display Optoelectronics Technology Holdings should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since China Display Optoelectronics Technology Holdings’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will China Display Optoelectronics Technology Holdings generate?

SEHK:334 Future Profit August 24th 18
SEHK:334 Future Profit August 24th 18

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 24.83% over the next couple of years, the future seems bright for China Display Optoelectronics Technology Holdings. 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? 334’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 track record of its management team. Have these factors changed since the last time you looked at 334? Will you have enough confidence to invest in the company should the price drop below its fair value?

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Are you a potential investor? If you’ve been keeping tabs on 334, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for 334, 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.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on China Display Optoelectronics Technology Holdings. You can find everything you need to know about China Display Optoelectronics Technology Holdings in the latest infographic research report. If you are no longer interested in China Display Optoelectronics Technology Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.