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Let's talk about the popular Industrial and Commercial Bank of China Limited (HKG:1398). The company's shares saw significant share price movement during recent months on the SEHK, rising to highs of HK$5.57 and falling to the lows of HK$4.90. 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 Industrial and Commercial Bank of China's current trading price of HK$5.06 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Industrial and Commercial Bank of China’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Industrial and Commercial Bank of China
What is Industrial and Commercial Bank of China worth?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 5.3x is currently trading slightly above its industry peers’ ratio of 5.28x, which means if you buy Industrial and Commercial Bank of China today, you’d be paying a relatively sensible price for it. And if you believe that Industrial and Commercial Bank of China should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. In addition to this, it seems like Industrial and Commercial Bank of China’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Industrial and Commercial Bank of China?
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 relatively muted profit growth of 7.8% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Industrial and Commercial Bank of China, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in 1398’s growth outlook, with shares trading around industry price multiples. 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 1398? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?