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Is It Too Late To Consider Buying Kingboard Laminates Holdings Limited (HKG:1888)?
While Kingboard Laminates Holdings Limited (HKG:1888) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the SEHK over the last few months. As a HK$32b market-cap stock, it seems odd Kingboard Laminates Holdings is not more well-covered by analysts. Although, there is more of an opportunity for mispricing in stocks with low coverage, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on Kingboard Laminates Holdings’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for Kingboard Laminates Holdings
What's The Opportunity In Kingboard Laminates Holdings?
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. 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 Laminates Holdings’s ratio of 6.18x is trading slightly below its industry peers’ ratio of 6.23x, which means if you buy Kingboard Laminates Holdings today, you’d be paying a reasonable price for it. And if you believe that Kingboard Laminates 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. In addition to this, it seems like Kingboard Laminates Holdings’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Kingboard Laminates Holdings generate?
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 an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Kingboard Laminates Holdings, at least in the near future.
What This Means For You
Are you a shareholder? 1888 seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on 1888, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on 1888 for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on 1888 should the price fluctuate below the industry PE ratio.
If you want to dive deeper into Kingboard Laminates Holdings, you'd also look into what risks it is currently facing. To help with this, we've discovered 2 warning signs (1 can't be ignored!) that you ought to be aware of before buying any shares in Kingboard Laminates Holdings.
If you are no longer interested in Kingboard Laminates Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Valuation is complex, but we're here to simplify it.
Discover if Kingboard Laminates Holdings might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.
About SEHK:1888
Kingboard Laminates Holdings
An investment holding company, manufactures and sells laminates in the People's Republic of China, Europe, other Asian countries, and the United States.
Excellent balance sheet with reasonable growth potential.
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