U.S. markets open in 6 hours 34 minutes

Should You Think About Buying Tang Palace (China) Holdings Limited (HKG:1181) Now?

Simply Wall St

Tang Palace (China) Holdings Limited (HKG:1181), which is in the hospitality business, and is based in Hong Kong, received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$1.19 at one point, and dropping to the lows of HK$0.72. 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 Tang Palace (China) Holdings's current trading price of HK$0.79 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 Tang Palace (China) 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 Tang Palace (China) Holdings

What is Tang Palace (China) Holdings worth?

Good news, investors! Tang Palace (China) Holdings is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. 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 8.47x is currently well-below the industry average of 15.22x, meaning that it is trading at a cheaper price relative to its peers. However, given that Tang Palace (China) 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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of returns can we expect from Tang Palace (China) Holdings in the future?

SEHK:1181 Price Estimation Relative to Market April 27th 2020

What kind of returns can we expect from Tang Palace (China) Holdings in the future? It’s one thing to get a stock at a low price, but the quality of the company is even more important, as its stock may be cheap or expensive for a reason. A way to assess stock quality is by looking how much it returns to you as the investor compared to how much you’re invested. Tang Palace (China) Holdings is expected to return 28% of your investment next year if you buy the stock today. This is a great return on your investment which builds up the case for owning the stock.

What this means for you:

Are you a shareholder? Since 1181 is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on 1181 for a while, now might be the time to enter the stock. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 1181. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Tang Palace (China) Holdings. You can find everything you need to know about Tang Palace (China) Holdings in the latest infographic research report. If you are no longer interested in Tang Palace (China) Holdings, 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.