In This Article:
Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Kaisa Group Holdings Ltd. (HKG:1638), which is in the real estate business, and is based in China, received a lot of attention from a substantial price increase on the SEHK over the last few months. As a HK$23b market-cap stock, it seems odd Kaisa Group Holdings is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Today I will analyse the most recent data on Kaisa Group Holdings’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for Kaisa Group Holdings
What's the opportunity in Kaisa Group Holdings?
The stock seems fairly valued at the moment according to my relative valuation model. 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 7.35x is currently trading slightly above its industry peers’ ratio of 6.23x, which means if you buy Kaisa Group Holdings today, you’d be paying a relatively reasonable price for it. And if you believe that Kaisa Group Holdings should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that Kaisa Group Holdings’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Kaisa Group Holdings look like?
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. Kaisa Group Holdings’s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? 1638’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at 1638? Will you have enough conviction to buy should the price fluctuate below the true value?