Powerlong Real Estate Holdings Limited (HKG:1238): Is Growth Priced In?

Powerlong Real Estate Holdings Limited (HKG:1238) is considered a high growth stock. However its last closing price of HK$4.09 left investors wondering whether this growth has already been factored into the share price. Let’s look into this by assessing 1238’s expected growth over the next few years.

View our latest analysis for Powerlong Real Estate Holdings

How is 1238 going to perform in the future?

Powerlong Real Estate Holdings is poised for significantly high earnings growth in the near future. The consensus forecast from 3 analysts is extremely bullish with earnings forecasted to rise significantly from today’s level of CN¥0.710 to CN¥1.057 over the next three years. This indicates an estimated earnings growth rate of 16% per year, on average, which indicates an exceedlingly positive future in the near term.

Is 1238 available at a good price after accounting for its growth?

We all love low PE stocks, but when it’s too low, for example, in the case of Powerlong Real Estate Holdings, something starts to smell. Why are investors placing such a low value on the company’s earnings? 1238’s price-to-earnings ratio is sitting at 4.93x, which tells us the company is undervalued based on its latest annual earnings update compared to the Real Estate average of 6.94x , and undervalued relative to the current HK market average of 12.12x .

SEHK:1238 Price Estimation Relative to Market, April 16th 2019
SEHK:1238 Price Estimation Relative to Market, April 16th 2019

Powerlong Real Estate Holdings’s price-to-earnings ratio stands at 4.93x, which is low, relative to the industry average. This already suggests that the stock could be undervalued. But, seeing as Powerlong Real Estate Holdings is perceived as a high-growth stock, we must also account for its earnings growth, which is captured in the PEG ratio. A PE ratio of 4.93x and expected year-on-year earnings growth of 16% give Powerlong Real Estate Holdings an extremely low PEG ratio of 0.31x. So, when we include the growth factor in our analysis, Powerlong Real Estate Holdings appears relatively cheap , based on its fundamentals.

What this means for you:

1238’s current undervaluation could signal a potential buying opportunity to increase your exposure to the stock, or it you’re a potential investor, now may be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:

  1. Financial Health: Are 1238’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has 1238 been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of 1238’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.