Today we're going to take a look at the well-established United Overseas Bank Limited (SGX:U11). The company's stock maintained its current share price over the past couple of month on the SGX, with a relatively tight range of S$25.17 to S$27.02. However, does this price actually reflect the true value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at United Overseas Bank’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 United Overseas Bank?
According to my valuation model, United Overseas Bank seems to be fairly priced at around 20% below my intrinsic value, which means if you buy United Overseas Bank today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth SGD32.75, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since United Overseas Bank’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will United Overseas Bank generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 United Overseas Bank, it is expected to deliver a relatively unexciting earnings growth of 8.5%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? U11’s 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 track record of its management team. Have these factors changed since the last time you looked at the stock? 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 U11, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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 United Overseas Bank. You can find everything you need to know about United Overseas Bank in the latest infographic research report. If you are no longer interested in United Overseas Bank, 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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