When Should You Buy Guangzhou R&F Properties Co., Ltd. (HKG:2777)?

Guangzhou R&F Properties Co., Ltd. (HKG:2777), might not be a large cap stock, but it saw significant share price movement during recent months on the SEHK, rising to highs of HK$10.62 and falling to the lows of HK$6.81. 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 Guangzhou R&F Properties' current trading price of HK$7.27 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Guangzhou R&F Properties’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 Guangzhou R&F Properties

What is Guangzhou R&F Properties worth?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Guangzhou R&F Properties’s ratio of 2.39x is trading slightly below its industry peers’ ratio of 7.38x, which means if you buy Guangzhou R&F Properties today, you’d be paying a reasonable price for it. And if you believe that Guangzhou R&F Properties should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, it seems like Guangzhou R&F Properties’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Guangzhou R&F Properties look like?

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. Guangzhou R&F Properties' earnings over the next few years are expected to increase by 27%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in 2777’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at 2777? 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 an eye on 2777, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 2777, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. When we did our research, we found 5 warning signs for Guangzhou R&F Properties (1 makes us a bit uncomfortable!) that we believe deserve your full attention.

If you are no longer interested in Guangzhou R&F Properties, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

If you're looking for stocks to buy, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.