Swire Pacific Limited (HKG:19) saw significant share price movement during recent months on the SEHK, rising to highs of HK$67.20 and falling to the lows of HK$60.00. 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 Swire Pacific's current trading price of HK$62.90 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 Swire Pacific's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's The Opportunity In Swire Pacific?
Great news for investors – Swire Pacific is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We'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 3.1x is currently well-below the industry average of 6.66x, meaning that it is trading at a cheaper price relative to its peers. Swire Pacific's share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it's there, it may be hard to fall back down into an attractive buying range.
What kind of growth will Swire Pacific generate?
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 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 Swire Pacific, at least in the near future.
What This Means For You
Are you a shareholder? Although 19 is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to 19, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you've been keeping tabs on 19 for some time, but hesitant on making the leap, we recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For instance, we've identified 3 warning signs for Swire Pacific (1 doesn't sit too well with us) you should be familiar with.
If you are no longer interested in Swire Pacific, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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.