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Let’s talk about the popular CK Hutchison Holdings Limited (HKG:1). The company’s shares received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$83.35 at one point, and dropping to the lows of HK$73.35. 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 CK Hutchison Holdings’s current trading price of HK$79 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 CK Hutchison Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for CK Hutchison Holdings
Is CK Hutchison Holdings still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. 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 8.19x is currently trading slightly above its industry peers’ ratio of 7.61x, which means if you buy CK Hutchison Holdings today, you’d be paying a relatively fair price for it. And if you believe that CK Hutchison 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 CK Hutchison 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 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. CK Hutchison Holdings’s earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in 1’s positive 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 conviction to buy should the price fluctuate below the true value?