SJM Holdings Limited (HKG:880), which is in the hospitality business, and is based in Hong Kong, saw a decent share price growth in the teens level on the SEHK over the last few months. 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. But what if there is still an opportunity to buy? Let’s take a look at SJM Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for SJM Holdings

Is SJM Holdings still cheap?

The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that SJM Holdings’s ratio of 14.98x is trading slightly above its industry peers’ ratio of 12.98x, which means if you buy SJM Holdings today, you’d be paying a relatively fair price for it. And if you believe SJM 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. Although, there may be an opportunity to buy in the future. This is because SJM Holdings’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will SJM Holdings generate?

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 SJM Holdings, it is expected to deliver a negative earnings growth of -6.0%, 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? 880 seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on 880, take a look at whether its fundamentals have changed.