Yahoo Finance Is It Time To Consider Buying Hong Kong Exchanges and Clearing Limited (HKG:388)?
Today we're going to take a look at the well-established Hong Kong Exchanges and Clearing Limited (HKG:388). The company's stock received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$280 at one point, and dropping to the lows of HK$241. 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 Hong Kong Exchanges and Clearing's current trading price of HK$259 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 Hong Kong Exchanges and Clearing’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 Hong Kong Exchanges and Clearing
What is Hong Kong Exchanges and Clearing worth?
Hong Kong Exchanges and Clearing appears to be overvalued 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 35.02x is currently well-above the industry average of 12.16x, meaning that it is trading at a more expensive price relative to its peers. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Hong Kong Exchanges and Clearing’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Hong Kong Exchanges and Clearing?
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. With profit expected to grow by 46% over the next couple of years, the future seems bright for Hong Kong Exchanges and Clearing. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? 388’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe 388 should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on 388 for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for 388, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Hong Kong Exchanges and Clearing. You can find everything you need to know about Hong Kong Exchanges and Clearing in the latest infographic research report. If you are no longer interested in Hong Kong Exchanges and Clearing, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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