Is Shimao Group Holdings Limited (HKG:813) Potentially Undervalued?

Shimao Group Holdings Limited (HKG:813), is not the largest company out there, but it received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$15.26 at one point, and dropping to the lows of HK$5.00. 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 Shimao Group Holdings' current trading price of HK$5.26 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 Shimao Group Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Shimao Group Holdings

Is Shimao Group Holdings still cheap?

Great news for investors – Shimao Group Holdings is still trading at a fairly cheap price 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 Shimao Group Holdings’s ratio of 1.19x is below its peer average of 6.77x, which indicates the stock is trading at a lower price compared to the Real Estate industry. What’s more interesting is that, Shimao Group Holdings’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Shimao Group Holdings 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. However, with a relatively muted profit growth of 2.1% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Shimao Group Holdings, at least in the short term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since 813 is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on 813 for a while, now might be the time to enter the stock. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 813. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

If you want to dive deeper into Shimao Group Holdings, you'd also look into what risks it is currently facing. For example, we've found that Shimao Group Holdings has 4 warning signs (1 is significant!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Shimao Group Holdings, 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.