Is Now The Time To Look At Buying Shanghai Industrial Holdings Limited (HKG:363)?
Shanghai Industrial Holdings Limited (HKG:363), which is in the industrials business, and is based in Hong Kong, saw significant share price movement during recent months on the SEHK, rising to highs of HK$17.98 and falling to the lows of HK$15.94. 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 Shanghai Industrial Holdings’s current trading price of HK$15.94 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Shanghai Industrial Holdings’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 Shanghai Industrial Holdings
Is Shanghai Industrial Holdings still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. 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 Shanghai Industrial Holdings’s ratio of 4.93x is trading slightly below its industry peers’ ratio of 6.88x, which means if you buy Shanghai Industrial Holdings today, you’d be paying a fair price for it. And if you believe Shanghai Industrial Holdings should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Shanghai Industrial Holdings’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.
What does the future of Shanghai Industrial Holdings look like?
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. 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 0.8% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Shanghai Industrial Holdings, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in 363’s growth 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 363? 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 tabs on 363, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive growth outlook may mean it’s worth diving deeper into other factors 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 Shanghai Industrial Holdings. You can find everything you need to know about Shanghai Industrial Holdings in the latest infographic research report. If you are no longer interested in Shanghai Industrial Holdings, 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.