Today we're going to take a look at the well-established CK Hutchison Holdings Limited (HKG:1). The company's stock saw a decent share price growth in the teens level on the SEHK over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on CK Hutchison Holdings’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for CK Hutchison Holdings
What is CK Hutchison Holdings worth?
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 7.14x is currently trading slightly above its industry peers’ ratio of 5.86x, which means if you buy CK Hutchison Holdings today, you’d be paying a relatively fair price for it. And if you believe CK Hutchison Holdings should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since CK Hutchison Holdings’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 does the future of CK Hutchison Holdings 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. 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. Though in the case of CK Hutchison Holdings, it is expected to deliver a relatively unexciting earnings growth of 6.2%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in 1’s growth outlook, with shares trading around its fair value. 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 1? Will you have enough confidence to invest in the company should the price drop below its fair value?