Is Now The Time To Look At Buying TK Group (Holdings) Limited (HKG:2283)?

TK Group (Holdings) Limited (HKG:2283), which is in the machinery business, and is based in China, received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$3.96 at one point, and dropping to the lows of HK$3.31. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether TK Group (Holdings)'s current trading price of HK$3.58 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 TK Group (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 TK Group (Holdings)

What is TK Group (Holdings) worth?

According to my relative valuation model, the stock seems to be currently fairly priced. I’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 9.21x is currently trading slightly below its industry peers’ ratio of 10.03x, which means if you buy TK Group (Holdings) today, you’d be paying a reasonable price for it. And if you believe that TK Group (Holdings) should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Furthermore, TK Group (Holdings)’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What does the future of TK Group (Holdings) look like?

SEHK:2283 Past and Future Earnings, November 29th 2019
SEHK:2283 Past and Future Earnings, November 29th 2019

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. TK Group (Holdings)’s earnings over the next few years are expected to increase by 32%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in 2283’s positive outlook, 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 2283? 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 an eye on 2283, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for 2283, 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 TK Group (Holdings). You can find everything you need to know about TK Group (Holdings) in the latest infographic research report. If you are no longer interested in TK Group (Holdings), you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.