Today we're going to take a look at the well-established Longfor Group Holdings Limited (HKG:960). The company's stock saw significant share price movement during recent months on the SEHK, rising to highs of HK$31.45 and falling to the lows of HK$26.35. 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 Longfor Group Holdings's current trading price of HK$28.3 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 Longfor Group Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Longfor Group Holdings 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 Longfor Group Holdings’s ratio of 9.2x is trading slightly above its industry peers’ ratio of 6.09x, which means if you buy Longfor Group Holdings today, you’d be paying a relatively reasonable price for it. And if you believe that Longfor Group Holdings should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that Longfor Group 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 Longfor Group 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. With profit expected to grow by 51% over the next couple of years, the future seems bright for Longfor Group Holdings. 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? 960’s optimistic future growth appears to have been factored into the current share price, 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 960? 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 960, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for 960, 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 Longfor Group Holdings. You can find everything you need to know about Longfor Group Holdings in the latest infographic research report. If you are no longer interested in Longfor Group Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.
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.