When Should You Buy K. Wah International Holdings Limited (HKG:173)?

K. Wah International Holdings Limited (HKG:173), 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$4.00 at one point, and dropping to the lows of HK$3.63. 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 K. Wah International Holdings' current trading price of HK$3.67 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at K. Wah International Holdings’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 K. Wah International Holdings

Is K. Wah International Holdings still cheap?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 2.74x is currently trading slightly below its industry peers’ ratio of 7.73x, which means if you buy K. Wah International Holdings today, you’d be paying a decent price for it. And if you believe K. Wah International Holdings should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. In addition to this, it seems like K. Wah International Holdings’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from K. Wah International Holdings?

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. Though in the case of K. Wah International Holdings, it is expected to deliver a relatively unexciting top-line growth of 0.2% over the next year, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? 173’s future growth appears to have been factored into the current share price, 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 173? 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 tabs on 173, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into K. Wah International Holdings, you'd also look into what risks it is currently facing. When we did our research, we found 2 warning signs for K. Wah International Holdings (1 is a bit concerning!) that we believe deserve your full attention.

If you are no longer interested in K. Wah International 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. 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.
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