Today we’re going to take a look at the well-established BOC Hong Kong (Holdings) Limited (HKG:2388). The company’s stock received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$39.25 at one point, and dropping to the lows of HK$29.05. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether BOC Hong Kong (Holdings)’s current trading price of HK$31.35 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 BOC Hong Kong (Holdings)’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What’s the opportunity in BOC Hong Kong (Holdings)?According to my valuation model, BOC Hong Kong (Holdings) seems to be fairly priced at around 4.2% below my intrinsic value, which means if you buy BOC Hong Kong (Holdings) today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth HK$32.72, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since BOC Hong Kong (Holdings)’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 kind of growth will BOC Hong Kong (Holdings) generate?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. BOC Hong Kong (Holdings)’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? 2388’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 the stock? 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 2388, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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 BOC Hong Kong (Holdings). You can find everything you need to know about BOC Hong Kong (Holdings) in the latest infographic research report. If you are no longer interested in BOC Hong Kong (Holdings), you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.