Should You Think About Buying CK Hutchison Holdings Limited (HKG:1) Now?

Let's talk about the popular CK Hutchison Holdings Limited (HKG:1). The company's shares saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. 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. However, could the stock still be trading at a relatively cheap price? 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.

View our latest analysis for CK Hutchison Holdings

Is CK Hutchison Holdings Still Cheap?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that CK Hutchison Holdings’s ratio of 6.92x is trading slightly above its industry peers’ ratio of 6.88x, which means if you buy CK Hutchison Holdings today, you’d be paying a relatively reasonable 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. Furthermore, CK Hutchison Holdings’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What does the future of CK Hutchison Holdings look like?

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. CK Hutchison Holdings' earnings over the next few years are expected to increase by 30%, 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? It seems like the market has already priced in 1’s positive outlook, 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 1? 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 an eye on 1, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 1, 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.

So while earnings quality is important, it's equally important to consider the risks facing CK Hutchison Holdings at this point in time. Every company has risks, and we've spotted 2 warning signs for CK Hutchison Holdings you should know about.

If you are no longer interested in CK Hutchison Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.