What Is China Unicom (Hong Kong) Limited's (HKG:762) Share Price Doing?

Today we're going to take a look at the well-established China Unicom (Hong Kong) Limited (HKG:762). The company's stock saw significant share price movement during recent months on the SEHK, rising to highs of HK$5.40 and falling to the lows of HK$4.30. 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 Unicom (Hong Kong)'s current trading price of HK$4.49 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 Unicom (Hong Kong)’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 Unicom (Hong Kong)

What's the opportunity in China Unicom (Hong Kong)?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 8.71x is currently trading slightly below its industry peers’ ratio of 11.83x, which means if you buy China Unicom (Hong Kong) today, you’d be paying a decent price for it. And if you believe China Unicom (Hong Kong) should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that China Unicom (Hong Kong)’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of China Unicom (Hong Kong) 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. 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 Unicom (Hong Kong)'s earnings over the next few years are expected to increase by 58%, 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? 762’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. 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 762? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on 762, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 762, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing China Unicom (Hong Kong) at this point in time. You'd be interested to know, that we found 1 warning sign for China Unicom (Hong Kong) and you'll want to know about it.

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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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