Is It Too Late To Consider Buying China Gas Holdings Limited (HKG:384)?
Let’s talk about the popular China Gas Holdings Limited (HKG:384). The company’s shares received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$35 at one point, and dropping to the lows of HK$20.2. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether China Gas Holdings’s current trading price of HK$21.15 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 China Gas Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for China Gas Holdings
What is China Gas Holdings worth?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 17.24x is currently trading slightly above its industry peers’ ratio of 17x, which means if you buy China Gas Holdings today, you’d be paying a relatively fair price for it. And if you believe that China Gas 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. Although, there may be an opportunity to buy in the future. This is because China Gas 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 China Gas 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. 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 81% over the next couple of years, the future seems bright for China Gas 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? It seems like the market has already priced in 384’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 track record of its management team. Have these factors changed since the last time you looked at 384? 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 an eye on 384, 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 384, which means it’s worth further examining 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 China Gas Holdings. You can find everything you need to know about China Gas Holdings in the latest infographic research report. If you are no longer interested in China Gas 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.
