Is Henderson Land Development Company Limited (HKG:12) Potentially Undervalued?

Today we're going to take a look at the well-established Henderson Land Development Company Limited (HKG:12). The company's stock received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$27.25 at one point, and dropping to the lows of HK$21.45. 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 Henderson Land Development's current trading price of HK$21.45 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 Henderson Land Development’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Henderson Land Development

Is Henderson Land Development Still Cheap?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 13.55% above our intrinsic value, which means if you buy Henderson Land Development today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is HK$18.89, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that Henderson Land Development’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Henderson Land Development generate?

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 35% over the next couple of years, the future seems bright for Henderson Land Development. 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? It seems like the market has already priced in 12’s positive outlook, with shares trading around its fair value. 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on 12, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Be aware that Henderson Land Development is showing 2 warning signs in our investment analysis and 1 of those is concerning...

If you are no longer interested in Henderson Land Development, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com