Should You Investigate Agricultural Bank of China Limited (HKG:1288) At HK$3.69?
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Today we’re going to take a look at the well-established Agricultural Bank of China Limited (HKG:1288). The company’s stock saw significant share price movement during recent months on the SEHK, rising to highs of HK$3.7 and falling to the lows of HK$3.36. 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 Agricultural Bank of China’s current trading price of HK$3.69 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 Agricultural Bank of China’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 Agricultural Bank of China
Is Agricultural Bank of China still cheap?
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 Agricultural Bank of China’s ratio of 5.25x is trading slightly below its industry peers’ ratio of 5.99x, which means if you buy Agricultural Bank of China today, you’d be paying a fair price for it. And if you believe that Agricultural Bank of China should be trading at this level in the long run, 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 Agricultural Bank of China’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 Agricultural Bank of China?
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. With profit expected to grow by a double-digit 17% over the next couple of years, the outlook is positive for Agricultural Bank of China. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in 1288’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 1288? 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 an eye on 1288, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for 1288, which 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 Agricultural Bank of China. You can find everything you need to know about Agricultural Bank of China in the latest infographic research report. If you are no longer interested in Agricultural Bank of China, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
