Is Now An Opportune Moment To Examine First Pacific Company Limited (HKG:142)?

While First Pacific Company Limited (HKG:142) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the SEHK over the last few months. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine First Pacific’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for First Pacific

Is First Pacific 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. 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 7.56x is currently trading slightly below its industry peers’ ratio of 11.02x, which means if you buy First Pacific today, you’d be paying a decent price for it. And if you believe that First Pacific 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. Furthermore, it seems like First Pacific’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from First Pacific?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 more than double over the next couple of years, the future seems bright for First Pacific. 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? 142’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 financial strength of the company. Have these factors changed since the last time you looked at 142? 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 142, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 142, 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.

If you want to dive deeper into First Pacific, you'd also look into what risks it is currently facing. When we did our research, we found 2 warning signs for First Pacific (1 is a bit unpleasant!) that we believe deserve your full attention.

If you are no longer interested in First Pacific, 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.