Why PICC Property and Casualty Company Limited (HKG:2328) Could Be Worth Watching

Simply Wall St
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Let's talk about the popular PICC Property and Casualty Company Limited (HKG:2328). 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$9.89 at one point, and dropping to the lows of HK$7.86. 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 PICC Property and Casualty's current trading price of HK$7.86 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 PICC Property and Casualty’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

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See our latest analysis for PICC Property and Casualty

What is PICC Property and Casualty worth?

According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that PICC Property and Casualty’s ratio of 9.95x is trading slightly below its industry peers’ ratio of 12.34x, which means if you buy PICC Property and Casualty today, you’d be paying a fair price for it. And if you believe that PICC Property and Casualty should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since PICC Property and Casualty’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 does the future of PICC Property and Casualty look like?

SEHK:2328 Past and Future Earnings, May 19th 2019
SEHK:2328 Past and Future Earnings, May 19th 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. 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. PICC Property and Casualty’s earnings over the next few years are expected to increase by 56%, 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? 2328’s optimistic 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 2328? 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 2328, 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 2328, which 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 PICC Property and Casualty. You can find everything you need to know about PICC Property and Casualty in the latest infographic research report. If you are no longer interested in PICC Property and Casualty, 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.

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