Today we're going to take a look at the well-established Swire Pacific Limited (HKG:19). The company's stock received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$78.50 at one point, and dropping to the lows of HK$68.05. 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 Swire Pacific's current trading price of HK$69.40 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 Swire Pacific’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in Swire Pacific?
According to my valuation model, Swire Pacific seems to be fairly priced at around 14.21% above my intrinsic value, which means if you buy Swire Pacific today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is HK$60.77, there’s only an insignificant downside when the price falls to its real value. In addition to this, Swire Pacific has a low beta, which suggests its share price is less volatile than the wider market.
What kind of growth will Swire Pacific generate?
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. Though in the case of Swire Pacific, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? 19 seems fairly priced right now, 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 the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on 19 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. In addition to this, 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 gel your views on 19 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 Swire Pacific. You can find everything you need to know about Swire Pacific in the latest infographic research report. If you are no longer interested in Swire Pacific, 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 firstname.lastname@example.org. 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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