What Does Swire Pacific Limited's (HKG:19) Share Price Indicate?

Swire Pacific Limited (HKG:19), is not the largest company out there, but it received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$66.80 at one point, and dropping to the lows of HK$52.20. 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 Swire Pacific's current trading price of HK$55.10 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Swire Pacific’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 Swire Pacific

Is Swire Pacific Still Cheap?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 Swire Pacific’s ratio of 20.7x is above its peer average of 7.14x, which suggests the stock is trading at a higher price compared to the Real Estate industry. Furthermore, Swire Pacific’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What kind of growth will Swire Pacific generate?

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 Swire 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? It seems like the market has well and truly priced in 19’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe 19 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on 19 for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for 19, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Swire Pacific as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 1 warning sign for Swire Pacific you should be aware of.

If you are no longer interested in Swire 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.