Today we’re going to take a look at the well-established China Telecom Corporation Limited (HKG:728). The company’s stock saw significant share price volatility over the past couple of months on the SEHK, rising to the highs of HK$3.84 and falling to the lows of HK$3.27. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether China Telecom’s current trading price of HK$3.53 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 China Telecom’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 China Telecom
Is China Telecom still cheap?
According to my valuation model, China Telecom seems to be fairly priced at around 0.55% above my intrinsic value, which means if you buy China Telecom today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is HK$3.51, there’s only an insignificant downside when the price falls to its real value. In addition to this, it seems like China Telecom’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from China Telecom?
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. China Telecom’s earnings over the next few years are expected to increase by 28.95%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in 728’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on 728, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, 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 China Telecom. You can find everything you need to know about China Telecom in the latest infographic research report. If you are no longer interested in China Telecom, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.