What Is Wharf Real Estate Investment Company Limited's (HKG:1997) Share Price Doing?

Let's talk about the popular Wharf Real Estate Investment Company Limited (HKG:1997). The company's shares received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$47.15 at one point, and dropping to the lows of HK$41.40. 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$44.90 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.

Check out our latest analysis for Wharf Real Estate Investment

Is Wharf Real Estate Investment still cheap?

According to my valuation model, Wharf Real Estate Investment seems to be fairly priced at around 15.05% 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 that the stock is really worth HK$39.03, then there isn’t really any room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Wharf Real Estate Investment’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Wharf Real Estate Investment look like?

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 -1.3% 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 de-risk your portfolio. Is your current exposure to the stock beneficial 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. Furthermore, 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 gel your views on 1997 should the price fluctuate below its true value.

If you'd like to know more about Wharf Real Estate Investment as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 1 warning sign for Wharf Real Estate Investment you should know about.

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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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