China Railway Signal

3969
End-of-day quote Stock Exchange of Hong Kong - 01/17
4.54HKD
+3.65%

China Railway Signal & Communication Corporation Limited : Expectation of a turn-around

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David Meurisse
Contributor / Partner

Strategy published on : 01/13/2020 | 09:36

long trade
Live

Entry price : 4.43HKD
Target : 4.87HKD
Stop-loss : 4.27HKD
Potential : 9.93%

The recent downside mouvement appears to lose momentum which could allow China Railway Signal & Communication Corporation Limited shares to regain a positive medium term outlook.
Investors have an opportunity to buy the stock and target the HKD 4.87.

Summary

● The company has strong fundamentals. More than 70% of listed companies have a lower mix of growth, profitability, debt and visibility criteria.

● The company has solid fundamentals for a short-term investment strategy.


Strengths

● The current area is a good opportunity for investors interested in buying the stock in a mid or long-term perspective. Indeed, the share is moving closer to its lower bound at HKD 4.13 HKD in weekly data.

● Growth is a substantial asset for the company, as anticipated by dedicated analysts. Within the next three years, growth is estimated to reach 41% by 2021.

● Thanks to a sound financial situation, the firm has significant leeway for investment.

● The company is one of the most undervalued, with an "enterprise value to sales" ratio at 0.66 for the 2019 fiscal year.

● Its low valuation, with P/E ratio at 11.04 and 9.52 for the ongoing fiscal year and 2020 respectively, makes the stock pretty attractive with regard to earnings multiples.

● Analysts have a positive opinion on this stock. Average consensus recommends overweighting or purchasing the stock.

● The difference between current prices and the average target price is rather important and implies a significant appreciation potential for the stock.


Weaknesses

● The group usually releases earnings worse than estimated.

● For the last twelve months, the trend in sales revisions has been clearly going down, which emphasizes downgraded expectations from the analysts.

● For the past seven days, analysts have been lowering their EPS expectations for the company.

● For the last few months, analysts have been revising downwards their earnings forecast.

● For the last 12 months, analysts have been regularly downgrading their EPS expectations. Analysts predict worse results for the company against their predictions a year ago.

● Below the resistance at 5.26 HKD, the stock shows a negative configuration when looking looking at the weekly chart.

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