Is Now An Opportune Moment To Examine China Unicom (Hong Kong) Limited (HKG:762)?

China Unicom (Hong Kong) Limited (HKG:762) received a lot of attention from a substantial price increase on the SEHK over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on China Unicom (Hong Kong)’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for China Unicom (Hong Kong)

What Is China Unicom (Hong Kong) Worth?

Great news for investors – China Unicom (Hong Kong) is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. we find that China Unicom (Hong Kong)’s ratio of 8.57x is below its peer average of 11.92x, which indicates the stock is trading at a lower price compared to the Telecom industry. Another thing to keep in mind is that China Unicom (Hong Kong)’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.

What kind of growth will China Unicom (Hong Kong) 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. 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. China Unicom (Hong Kong)'s earnings over the next few years are expected to increase by 36%, 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 762 is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive 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 762 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 762. 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.

So while earnings quality is important, it's equally important to consider the risks facing China Unicom (Hong Kong) at this point in time. For example - China Unicom (Hong Kong) has 1 warning sign we think you should be aware of.

If you are no longer interested in China Unicom (Hong Kong), you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.