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Today we’re going to take a look at the well-established China Telecom Corporation Limited (HKG:728). The company’s stock saw a decent share price growth in the teens level on the SEHK over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at China Telecom’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What is China Telecom worth?The stock seems fairly valued at the moment according to my valuation model. It’s trading around 10.35% above my intrinsic value, which means if you buy China Telecom today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth HK$3.86, then there isn’t really any room for the share price grow beyond what it’s currently trading. What’s more, China Telecom’s share price may be more stable over time (relative to the market), as indicated by its low beta.
Can we expect growth from China Telecom?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. With profit expected to grow by 62% over the next couple of years, the future seems bright for China Telecom. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? 728’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on 728, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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.
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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.