Is It Time To Consider Buying Yuzhou Properties Company Limited (HKG:1628)?

Yuzhou Properties Company Limited (HKG:1628), which is in the real estate business, and is based in China, saw significant share price movement during recent months on the SEHK, rising to highs of HK$4.42 and falling to the lows of HK$3.49. 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 Yuzhou Properties’s current trading price of HK$3.49 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 Yuzhou Properties’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 Yuzhou Properties

What is Yuzhou Properties worth?

The share price seems sensible at the moment according to my price multiple model, where I compare the company’s price-to-earnings ratio to the industry average. 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 3.94x is currently trading slightly below its industry peers’ ratio of 6.72x, which means if you buy Yuzhou Properties today, you’d be paying a decent price for it. And if you believe Yuzhou Properties should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that Yuzhou Properties’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Yuzhou Properties look like?

SEHK:1628 Past and Future Earnings, March 16th 2020
SEHK:1628 Past and Future Earnings, March 16th 2020

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Yuzhou Properties’s earnings over the next few years are expected to increase by 44%, 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? 1628’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 1628? 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 tabs on 1628, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 1628, 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 Yuzhou Properties. You can find everything you need to know about Yuzhou Properties in the latest infographic research report. If you are no longer interested in Yuzhou Properties, 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 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.

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. Thank you for reading.