Is There Now An Opportunity In Shenzhen International Holdings Limited (HKG:152)?

Simply Wall St

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Shenzhen International Holdings Limited (HKG:152), which is in the infrastructure 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$17.86 at one point, and dropping to the lows of HK$13.66. 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 Shenzhen International Holdings's current trading price of HK$14.38 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Shenzhen International 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 Shenzhen International Holdings

What is Shenzhen International Holdings worth?

According to my relative valuation model, the stock seems to be currently fairly priced. 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 7.08x is currently trading slightly below its industry peers’ ratio of 8.81x, which means if you buy Shenzhen International Holdings today, you’d be paying a fair price for it. And if you believe Shenzhen International Holdings should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. Furthermore, it seems like Shenzhen International Holdings’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Shenzhen International Holdings?

SEHK:152 Past and Future Earnings, June 11th 2019

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. However, with a relatively muted profit growth of 6.3% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Shenzhen International Holdings, at least in the short term.

What this means for you:

Are you a shareholder? It seems like the market has already priced in 152’s growth outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at 152? Will you have enough conviction to buy should the price fluctuate below the true value?

Are you a potential investor? If you’ve been keeping an eye on 152, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive growth outlook may mean it’s worth diving deeper into other factors 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 Shenzhen International Holdings. You can find everything you need to know about Shenzhen International Holdings in the latest infographic research report. If you are no longer interested in Shenzhen International Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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.

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. Thank you for reading.