At HK$38.90, Is It Time To Put Wharf Real Estate Investment Company Limited (HKG:1997) On Your Watch List?

Wharf Real Estate Investment Company Limited (HKG:1997) received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$44.80 at one point, and dropping to the lows of HK$37.20. 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 Wharf Real Estate Investment's current trading price of HK$38.90 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's the opportunity in Wharf Real Estate Investment?

According to my valuation model, Wharf Real Estate Investment seems to be fairly priced at around 11% below my intrinsic value, which means if you buy Wharf Real Estate Investment today, you’d be paying a fair price for it. And if you believe the company’s true value is HK$43.79, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Wharf Real Estate Investment’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

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. 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. However, with an expected decline of -5.1% in revenues over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Wharf Real Estate Investment. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Currently, 1997 appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on 1997 for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on 1997 should the price fluctuate below its true value.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Every company has risks, and we've spotted 1 warning sign for Wharf Real Estate Investment you should know about.

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.

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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.