58.com Inc. (NYSE:WUBA), which is in the interactive media and services business, and is based in China, saw significant share price movement during recent months on the NYSE, rising to highs of US$69.37 and falling to the lows of US$55.62. 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 58.com's current trading price of US$56.06 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at 58.com’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is 58.com worth?
Great news for investors – 58.com is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is $92.14, but it is currently trading at US$56.06 on the share market, meaning that there is still an opportunity to buy now. However, given that 58.com’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 58.com?
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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for 58.com, at least in the near future.
What this means for you:
Are you a shareholder? Although WUBA is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to WUBA, 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 an eye on WUBA for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on 58.com. You can find everything you need to know about 58.com in the latest infographic research report. If you are no longer interested in 58.com, 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 email@example.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.
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