Is Now An Opportune Moment To Examine Sino-Ocean Group Holding Limited (HKG:3377)?

Sino-Ocean Group Holding Limited (HKG:3377), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Sino-Ocean Group Holding’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Sino-Ocean Group Holding

What's the opportunity in Sino-Ocean Group Holding?

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 5.41x is currently trading slightly below its industry peers’ ratio of 8.39x, which means if you buy Sino-Ocean Group Holding today, you’d be paying a reasonable price for it. And if you believe Sino-Ocean Group Holding 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. So, is there another chance to buy low in the future? Given that Sino-Ocean Group Holding’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 Sino-Ocean Group Holding generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Sino-Ocean Group Holding's earnings over the next few years are expected to increase by 50%, 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? 3377’s optimistic 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 3377? 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 3377, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 3377, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Sino-Ocean Group Holding at this point in time. For example, Sino-Ocean Group Holding has 3 warning signs (and 1 which is potentially serious) we think 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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