What Does Kingboard Holdings Limited's (HKG:148) Share Price Indicate?

Kingboard Holdings Limited (HKG:148), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. As a HK$49b market cap stock, it seems odd Kingboard Holdings is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Let’s examine Kingboard Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Kingboard Holdings

Is Kingboard Holdings still cheap?

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 Kingboard Holdings’s ratio of 10.33x is trading slightly below its industry peers’ ratio of 10.82x, which means if you buy Kingboard Holdings today, you’d be paying a reasonable price for it. And if you believe that Kingboard Holdings 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. Although, there may be an opportunity to buy in the future. This is because Kingboard Holdings’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Kingboard Holdings 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. In Kingboard Holdings' case, its revenues over the next few years are expected to grow by 68%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger 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 148’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 148? 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 148, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 148, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Kingboard Holdings has 2 warning signs and it would be unwise to ignore them.

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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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