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What Does China Travel International Investment Hong Kong Limited's (HKG:308) Share Price Indicate?

Simply Wall St

China Travel International Investment Hong Kong Limited (HKG:308), which is in the hospitality business, and is based in Hong Kong, saw significant share price movement during recent months on the SEHK, rising to highs of HK$1.46 and falling to the lows of HK$1.19. 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 China Travel International Investment Hong Kong's current trading price of HK$1.26 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 China Travel International Investment Hong Kong’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for China Travel International Investment Hong Kong

What's the opportunity in China Travel International Investment Hong Kong?

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 9.45x is currently trading slightly below its industry peers’ ratio of 13.64x, which means if you buy China Travel International Investment Hong Kong today, you’d be paying a fair price for it. And if you believe China Travel International Investment Hong Kong 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 China Travel International Investment Hong Kong’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 China Travel International Investment Hong Kong?

SEHK:308 Past and Future Earnings, February 8th 2020

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. However, with a negative profit growth of -14% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for China Travel International Investment Hong Kong. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Currently, 308 appears to be trading around its fair value, 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 308, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on 308 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 308 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 China Travel International Investment Hong Kong. You can find everything you need to know about China Travel International Investment Hong Kong in the latest infographic research report. If you are no longer interested in China Travel International Investment Hong Kong, 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.