Stock Analysis

Is Now The Time To Look At Buying China State Construction International Holdings Limited (HKG:3311)?

SEHK:3311
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China State Construction International Holdings Limited (HKG:3311), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the SEHK. As a mid-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? Today I will analyse the most recent data on China State Construction International Holdings’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for China State Construction International Holdings

Is China State Construction International Holdings Still Cheap?

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 China State Construction International Holdings’s ratio of 5.93x is trading slightly below its industry peers’ ratio of 9.2x, which means if you buy China State Construction International Holdings today, you’d be paying a decent price for it. And if you believe that China State Construction International Holdings should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. In addition to this, it seems like China State Construction International 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 does the future of China State Construction International Holdings look like?

earnings-and-revenue-growth
SEHK:3311 Earnings and Revenue Growth January 18th 2023

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. China State Construction International Holdings' earnings over the next few years are expected to increase by 29%, 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 3311’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 3311? 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 an eye on 3311, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 3311, 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.

If you'd like to know more about China State Construction International Holdings as a business, it's important to be aware of any risks it's facing. For instance, we've identified 2 warning signs for China State Construction International Holdings (1 is a bit concerning) you should be familiar with.

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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.