When Should You Buy Industrial and Commercial Bank of China Limited (HKG:1398)?

Industrial and Commercial Bank of China Limited (HKG:1398) saw a decent share price growth in the teens level on the SEHK over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s take a look at Industrial and Commercial Bank of China’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Industrial and Commercial Bank of China

What’s the opportunity in Industrial and Commercial Bank of China?

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 5.79x is currently trading slightly above its industry peers’ ratio of 5.66x, which means if you buy Industrial and Commercial Bank of China today, you’d be paying a relatively fair price for it. And if you believe Industrial and Commercial Bank of China should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Industrial and Commercial Bank of China’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.

Can we expect growth from Industrial and Commercial Bank of China?

SEHK:1398 Past and Future Earnings, December 2nd 2019
SEHK:1398 Past and Future Earnings, December 2nd 2019

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. With profit expected to grow by a double-digit 12% over the next couple of years, the outlook is positive for Industrial and Commercial Bank of China. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? 1398’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 1398? 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 1398, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for 1398, 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 Industrial and Commercial Bank of China. You can find everything you need to know about Industrial and Commercial Bank of China in the latest infographic research report. If you are no longer interested in Industrial and Commercial Bank of China, 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.