Why CK Hutchison Holdings Limited (HKG:1) Could Be Worth Watching

By
Simply Wall St
Published
November 28, 2021
SEHK:1
Source: Shutterstock

Let's talk about the popular CK Hutchison Holdings Limited (HKG:1). The company's shares saw significant share price movement during recent months on the SEHK, rising to highs of HK$57.50 and falling to the lows of HK$50.75. 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 CK Hutchison Holdings' current trading price of HK$51.55 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 CK Hutchison Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for CK Hutchison Holdings

What is CK Hutchison Holdings worth?

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. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that CK Hutchison Holdings’s ratio of 5.74x is trading slightly below its industry peers’ ratio of 6.05x, which means if you buy CK Hutchison Holdings today, you’d be paying a reasonable price for it. And if you believe CK Hutchison Holdings should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since CK Hutchison 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 does the future of CK Hutchison Holdings look like?

earnings-and-revenue-growth
SEHK:1 Earnings and Revenue Growth November 29th 2021

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. With profit expected to grow by a double-digit 20% over the next couple of years, the outlook is positive for CK Hutchison Holdings. 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? 1’s optimistic future growth appears to have been factored into the current share price, 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 conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on 1, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 1, 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.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 2 warning signs with CK Hutchison Holdings, and understanding them should be part of your investment process.

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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