Is It Too Late To Consider Buying Legend Holdings Corporation (HKG:3396)?

While Legend Holdings Corporation (HKG:3396) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$13.66 at one point, and dropping to the lows of HK$11.06. 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 Legend Holdings' current trading price of HK$12.12 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 Legend Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Legend Holdings

What is Legend Holdings worth?

Good news, investors! Legend Holdings is still a bargain right now according to my price multiple model, which compares 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 Legend Holdings’s ratio of 1.73x is below its peer average of 15.21x, which indicates the stock is trading at a lower price compared to the Tech industry. What’s more interesting is that, Legend 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 Legend 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. 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. 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 Legend Holdings, at least in the near future.

What this means for you:

Are you a shareholder? Although 3396 is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to 3396, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on 3396 for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So while earnings quality is important, it's equally important to consider the risks facing Legend Holdings at this point in time. For example, we've found that Legend Holdings has 3 warning signs (2 don't sit too well with us!) that deserve your attention before going any further with your analysis.

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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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