In This Article:
Let’s talk about the popular Swire Pacific Limited (SEHK:19). The company’s shares saw significant share price volatility over the past couple of months on the SEHK, rising to the highs of HK$82.2 and falling to the lows of HK$72.7. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Swire Pacific’s current trading price of HK$79.15 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 Swire Pacific’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for Swire Pacific
What’s the opportunity in Swire Pacific?
According to my valuation model, the stock is currently overvalued by about 28%, trading at HK$79.15 compared to my intrinsic value of HK$61.79. This means that the opportunity to buy Swire Pacific at a good price has disappeared! Furthermore, Swire Pacific’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What does the future of Swire Pacific look like?
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. Though in the case of Swire Pacific, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? If you believe 19 should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, this could be the right time to reduce your total portfolio risk. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on 19 for some time, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?