Is It Time To Consider Buying CK Hutchison Holdings Limited (HKG:1)?

CK Hutchison Holdings Limited (HKG:1) saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. 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 CK Hutchison Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for CK Hutchison Holdings

What's The Opportunity In CK Hutchison Holdings?

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 5.12x is currently trading slightly above its industry peers’ ratio of 5.06x, which means if you buy CK Hutchison Holdings today, you’d be paying a relatively sensible price for it. And if you believe that CK Hutchison Holdings should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. In addition to this, it seems like CK Hutchison Holdings’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will CK Hutchison 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. 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. Though in the case of CK Hutchison Holdings, it is expected to deliver a negative earnings growth of -0.8%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Currently, 1 appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on 1, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on 1 for a while, now may not be the most optimal time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on 1 should the price fluctuate below the industry PE ratio.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Be aware that CK Hutchison Holdings is showing 2 warning signs in our investment analysis and 1 of those can't be ignored...

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.