Is There Now An Opportunity In Powerlong Real Estate Holdings Limited (HKG:1238)?

Powerlong Real Estate Holdings Limited (HKG:1238), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. As a 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? Let’s take a look at Powerlong Real Estate Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Powerlong Real Estate Holdings

What's The Opportunity In Powerlong Real Estate Holdings?

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 Powerlong Real Estate Holdings’s ratio of 8.64x is trading slightly above its industry peers’ ratio of 7.15x, which means if you buy Powerlong Real Estate Holdings today, you’d be paying a relatively reasonable price for it. And if you believe that Powerlong Real Estate Holdings should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Although, there may be an opportunity to buy in the future. This is because Powerlong Real Estate Holdings’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Powerlong Real Estate Holdings 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. 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. With profit expected to more than double over the next couple of years, the future seems bright for Powerlong Real Estate 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? It seems like the market has already priced in 1238’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 1238? 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 1238, 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 1238, 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'd like to know more about Powerlong Real Estate Holdings as a business, it's important to be aware of any risks it's facing. For example, we've found that Powerlong Real Estate Holdings has 3 warning signs (1 can't be ignored!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Powerlong Real Estate 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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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.