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 increase on the SEHK over the last few months. With many analysts covering the large-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 CK Hutchison Holdings's outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for CK Hutchison Holdings
Is CK Hutchison Holdings Still Cheap?
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 CK Hutchison Holdings's ratio of 5.55x is trading in-line with its industry peers' ratio, which means if you buy CK Hutchison Holdings today, you'd be paying a relatively reasonable price for it. Furthermore, it seems like CK Hutchison Holdings's share price is quite stable, which means there may be less chances to buy low in the future now that it's priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.
What does the future of CK Hutchison Holdings look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. However, with a negative profit growth of -0.4% expected over the next couple of years, near-term growth certainly doesn't appear to be a driver for a buy decision for CK Hutchison Holdings. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? 1 seems priced close to industry peers right now, 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 optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on 1, take a look at whether its fundamentals have changed.
Are you a potential investor? If you've been keeping an eye on 1 for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there's less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven't considered today, which can help gel your views on 1 should the price fluctuate below the industry PE ratio.
So while earnings quality is important, it's equally important to consider the risks facing CK Hutchison Holdings at this point in time. When we did our research, we found 2 warning signs for CK Hutchison Holdings (1 can't be ignored!) that we believe deserve your full attention.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.