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When Should You Buy Great Eagle Holdings Limited (HKG:41)?

Simply Wall St

Great Eagle Holdings Limited (HKG:41), which is in the real estate business, and is based in Hong Kong, received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$29.00 at one point, and dropping to the lows of HK$25.60. 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 Great Eagle Holdings's current trading price of HK$26.10 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Great Eagle Holdings’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 Great Eagle Holdings

What is Great Eagle Holdings worth?

The stock seems fairly valued at the moment according to my relative valuation model. 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 Great Eagle Holdings’s ratio of 4.07x is trading slightly below its industry peers’ ratio of 6.63x, which means if you buy Great Eagle Holdings today, you’d be paying a reasonable price for it. And if you believe Great Eagle Holdings should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Great Eagle Holdings’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Great Eagle Holdings look like?

SEHK:41 Past and Future Earnings, December 4th 2019

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. However, with an expected decline of -11% in revenues over the next year, short term growth isn’t a driver for a buy decision for Great Eagle Holdings. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? 41 seems fairly priced 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 41, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on 41 for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which 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 crystalize your views on 41 should the price fluctuate below its true value.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Great Eagle Holdings. You can find everything you need to know about Great Eagle Holdings in the latest infographic research report. If you are no longer interested in Great Eagle Holdings, 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.