Is It Time To Consider Buying Wharf (Holdings) Limited (HKG:4)?

While Wharf (Holdings) Limited (HKG:4) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the SEHK over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at Wharf (Holdings)’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Wharf (Holdings)

What's the opportunity in Wharf (Holdings)?

Wharf (Holdings) appears to be overvalued by 38% at the moment, based on my discounted cash flow valuation. The stock is currently priced at HK$19.48 on the market compared to my intrinsic value of HK$14.12. This means that the opportunity to buy Wharf (Holdings) at a good price has disappeared! But, is there another opportunity to buy low in the future? Since Wharf (Holdings)’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. 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.

Can we expect growth from Wharf (Holdings)?

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. With profit expected to grow by 94% over the next couple of years, the future seems bright for Wharf (Holdings). It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in 4’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe 4 should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on 4 for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for 4, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Wharf (Holdings) has 1 warning sign and it would be unwise to ignore this.

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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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