Is Beijing Urban Construction Design & Development Group Co., Limited (HKG:1599) Undervalued After Accounting For Its Future Growth?

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Beijing Urban Construction Design & Development Group Co., Limited (HKG:1599) is a stock well-positioned for future growth, but many investors are wondering whether its last closing price of HK$2.34 is based on unrealistic expectations. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.

See our latest analysis for Beijing Urban Construction Design & Development Group

What are the future expectations?

Investors in Beijing Urban Construction Design & Development Group have been patiently waiting for the uptick in earnings. If you believe the analysts covering the stock then the following year will be very interesting. The consensus forecast from 3 analysts is buoyant with earnings per share estimated to surge from current levels of CN¥0.417 to CN¥0.632 over the next three years. On average, this leads to a growth rate of 15% each year, which indicates a solid future in the near term.

Is 1599 available at a good price after accounting for its growth?

We all love low PE stocks, but when it’s too low, for example, in the case of Beijing Urban Construction Design & Development Group, something starts to smell. Why are investors placing such a low value on the company’s earnings? 1599’s price-to-earnings ratio is sitting at 4.96x, which tells us the company is undervalued based on its latest annual earnings update compared to the Construction average of 10.66x , and undervalued relative to the current HK market average of 11.06x .

SEHK:1599 Price Estimation Relative to Market, July 8th 2019
SEHK:1599 Price Estimation Relative to Market, July 8th 2019

We already know that 1599 appears to be undervalued based on its PE ratio, compared to the industry average. However, to be able to properly assess the value of a high-growth stock such as Beijing Urban Construction Design & Development Group, we must incorporate its earnings growth in our valuation. The PEG ratio is a great calculation to take account of growth in the stock’s valuation. A PE ratio of 4.96x and expected year-on-year earnings growth of 15% give Beijing Urban Construction Design & Development Group an extremely low PEG ratio of 0.34x. Based on this growth, Beijing Urban Construction Design & Development Group’s stock can be considered relatively cheap , based on the fundamentals.

What this means for you:

1599’s current undervaluation could signal a potential buying opportunity to increase your exposure to the stock, or it you’re a potential investor, now may be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:

  1. Financial Health: Are 1599’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has 1599 been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of 1599’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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.

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. Thank you for reading.