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Hutchison Telecommunications Hong Kong Holdings Limited (HKG:215), which is in the wireless telecom 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 stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Hutchison Telecommunications Hong Kong Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Check out our latest analysis for Hutchison Telecommunications Hong Kong Holdings
What is Hutchison Telecommunications Hong Kong Holdings worth?
According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Hutchison Telecommunications Hong Kong Holdings’s ratio of 14.94x is trading slightly below its industry peers’ ratio of 15.46x, which means if you buy Hutchison Telecommunications Hong Kong Holdings today, you’d be paying a decent price for it. And if you believe Hutchison Telecommunications Hong Kong Holdings should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. In addition to this, it seems like Hutchison Telecommunications Hong Kong Holdings’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from Hutchison Telecommunications Hong Kong Holdings?
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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Hutchison Telecommunications Hong Kong Holdings, at least in the near future.
What this means for you:
Are you a shareholder? Currently, 215 appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk 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 215, take a look at whether its fundamentals have changed.