Pico Far East Holdings Limited (HKG:752), which is in the media business, and is based in Hong Kong, saw significant share price movement during recent months on the SEHK, rising to highs of HK$3.31 and falling to the lows of HK$2.53. 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 Pico Far East Holdings's current trading price of HK$2.57 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Pico Far East Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
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What's the opportunity in Pico Far East Holdings?
The stock seems fairly valued at the moment 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 11.68x is currently trading slightly below its industry peers’ ratio of 14.96x, which means if you buy Pico Far East Holdings today, you’d be paying a reasonable price for it. And if you believe Pico Far East Holdings should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. So, is there another chance to buy low in the future? Given that Pico Far East Holdings’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Pico Far East Holdings?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Pico Far East Holdings’s earnings over the next few years are expected to increase by 32%, 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 752’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 financial strength of the company. Have these factors changed since the last time you looked at 752? Will you have enough conviction to buy should the price fluctuate below the true value?
Are you a potential investor? If you’ve been keeping tabs on 752, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for 752, 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 Pico Far East Holdings. You can find everything you need to know about Pico Far East Holdings in the latest infographic research report. If you are no longer interested in Pico Far East Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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If you spot an error that warrants correction, please contact the editor at email@example.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. Thank you for reading.