Is Wharf Real Estate Investment Company Limited (HKG:1997) Potentially Undervalued?

Today we're going to take a look at the well-established Wharf Real Estate Investment Company Limited (HKG:1997). 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$46.70 at one point, and dropping to the lows of HK$38.25. 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 Wharf Real Estate Investment's current trading price of HK$41.55 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 Wharf Real Estate Investment’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Wharf Real Estate Investment

What Is Wharf Real Estate Investment Worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 7.97% above my intrinsic value, which means if you buy Wharf Real Estate Investment today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is HK$38.48, then there isn’t really any room for the share price grow beyond what it’s currently trading. What's more, Wharf Real Estate Investment’s share price may be more stable over time (relative to the market), as indicated by its low beta.

What kind of growth will Wharf Real Estate Investment 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. Wharf Real Estate Investment's revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to 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 1997’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 confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on 1997, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect 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.

So while earnings quality is important, it's equally important to consider the risks facing Wharf Real Estate Investment at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Wharf Real Estate Investment.

If you are no longer interested in Wharf Real Estate Investment, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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

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.