Is There Now An Opportunity In China Resources Land Limited (HKG:1109)?

China Resources Land Limited (HKG:1109) received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$38.30 at one point, and dropping to the lows of HK$28.00. 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 China Resources Land's current trading price of HK$30.55 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 Resources Land’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 Resources Land

What's the opportunity in China Resources Land?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 6.79x is currently trading slightly above its industry peers’ ratio of 6.31x, which means if you buy China Resources Land today, you’d be paying a relatively sensible price for it. And if you believe China Resources Land should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Furthermore, China Resources Land’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

Can we expect growth from China Resources Land?

SEHK:1109 Past and Future Earnings May 22nd 2020
SEHK:1109 Past and Future Earnings May 22nd 2020

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. China Resources Land’s earnings over the next few years are expected to increase by 22%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? 1109’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. 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 1109? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on 1109, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 1109, 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 Resources Land. You can find everything you need to know about China Resources Land in the latest infographic research report. If you are no longer interested in China Resources Land, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.