Let's talk about the popular China Resources Land Limited (HKG:1109). The company's shares saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine China Resources Land’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What is China Resources Land worth?
According to my valuation model, China Resources Land seems to be fairly priced at around 9.5% below my intrinsic value, which means if you buy China Resources Land today, you’d be paying a reasonable price for it. And if you believe the company’s true value is HK$39.28, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because China Resources Land’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.
Can we expect growth from China Resources Land?
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 relatively muted profit growth of 8.5% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for China Resources Land, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in 1109’s future 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 an eye on 1109, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth diving deeper into 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 Resources Land. You can find everything you need to know about China Resources Land in the latest infographic research report. If you are no longer interested in China Resources Land, 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 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.
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