Should You Think About Buying Wharf Real Estate Investment Company Limited (HKG:1997) Now?

Let's talk about the popular Wharf Real Estate Investment Company Limited (HKG:1997). The company's shares saw significant share price movement during recent months on the SEHK, rising to highs of HK$39.60 and falling to the lows of HK$33.70. 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$36.75 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.

Our analysis indicates that 1997 is potentially overvalued!

Is Wharf Real Estate Investment Still Cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 7.27% above my intrinsic value, which means if you buy Wharf Real Estate Investment today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth HK$34.26, there’s only an insignificant downside when the price falls to its real value. Furthermore, Wharf Real Estate Investment’s low beta implies that the stock is less volatile than the wider market.

What kind of growth will Wharf Real Estate Investment generate?

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. However, with an expected decline of -0.6% 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? 1997 seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk 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 optimal time to buy, given it is trading around its fair value. The price seems 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. You'd be interested to know, that we found 1 warning sign for Wharf Real Estate Investment and you'll want to know about it.

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.