Is Now The Time To Look At Buying Agricultural Bank of China Limited (HKG:1288)?

Let's talk about the popular Agricultural Bank of China Limited (HKG:1288). The company's shares saw significant share price movement during recent months on the SEHK, rising to highs of HK$3.85 and falling to the lows of HK$3.34. 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 Agricultural Bank of China's current trading price of HK$3.35 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 Agricultural Bank of China’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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Check out our latest analysis for Agricultural Bank of China

Is Agricultural Bank of China still cheap?

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 5.01x is currently trading slightly below its industry peers’ ratio of 6.1x, which means if you buy Agricultural Bank of China today, you’d be paying a reasonable price for it. And if you believe Agricultural Bank of China should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. So, is there another chance to buy low in the future? Given that Agricultural Bank of China’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 kind of growth will Agricultural Bank of China 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. Agricultural Bank of China’s earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? 1288’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 financial strength of the company. Have these factors changed since the last time you looked at 1288? 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 1288, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for 1288, 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 Agricultural Bank of China. You can find everything you need to know about Agricultural Bank of China in the latest infographic research report. If you are no longer interested in Agricultural Bank of China, 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.