In This Article:
China Everbright International Limited (HKG:257), which is in the commercial services business, and is based in Hong Kong, saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine China Everbright International’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
View our latest analysis for China Everbright International
What is China Everbright International worth?
Good news, investors! China Everbright International is still a bargain right now. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that China Everbright International’s ratio of 7.87x is below its peer average of 15.87x, which suggests the stock is undervalued compared to the Commercial Services industry. What’s more interesting is that, China Everbright International’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will China Everbright International generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. China Everbright International’s earnings over the next few years are expected to increase by 41.7%, 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? Since 257 is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on 257 for a while, now might be the time to enter the stock. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 257. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.