Let's talk about the popular Great Wall Motor Company Limited (HKG:2333). The company's shares saw a significant share price rise of 28% in the past couple of months on the SEHK. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company's outlook is already priced into the stock. However, what if the stock is still a bargain? Today we will analyse the most recent data on Great Wall Motor's outlook and valuation to see if the opportunity still exists.
What's The Opportunity In Great Wall Motor?
Good news, investors! Great Wall Motor is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. We've used the price-to-earnings ratio in this instance because there's not enough visibility to forecast its cash flows. The stock's ratio of 8.99x is currently well-below the industry average of 12.28x, meaning that it is trading at a cheaper price relative to its peers. However, given that Great Wall Motor's share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Great Wall Motor?
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. However, with a negative profit growth of -8.5% expected over the next couple of years, near-term growth certainly doesn't appear to be a driver for a buy decision for Great Wall Motor. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although 2333 is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to 2333, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you've been keeping tabs on 2333 for some time, but hesitant on making the leap, we recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Diving deeper into the forecasts for Great Wall Motor mentioned earlier will help you understand how analysts view the stock going forward. Luckily, you can check out what analysts are forecasting by clicking here.
If you are no longer interested in Great Wall Motor, 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.
