At HK$2.98, Is It Time To Put China Telecom Corporation Limited (HKG:728) On Your Watch List?

China Telecom Corporation Limited (HKG:728) received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$3.31 at one point, and dropping to the lows of HK$2.95. 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 China Telecom's current trading price of HK$2.98 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at China Telecom’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for China Telecom

What's the opportunity in China Telecom?

Great news for investors – China Telecom 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 China Telecom’s ratio of 10.08x is below its peer average of 15.5x, which indicates the stock is trading at a lower price compared to the Telecom industry. Another thing to keep in mind is that China Telecom’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

Can we expect growth from China Telecom?

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. China Telecom’s earnings over the next few years are expected to increase by 21%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since 728 is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on 728 for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 728. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on China Telecom. You can find everything you need to know about China Telecom in the latest infographic research report. If you are no longer interested in China Telecom, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.