Why China Unicom (Hong Kong) Limited (HKG:762) Could Be Worth Watching

China Unicom (Hong Kong) Limited (HKG:762) received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$5.85 at one point, and dropping to the lows of HK$4.82. 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$4.94 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.

See our latest analysis for China Unicom (Hong Kong)

What Is China Unicom (Hong Kong) Worth?

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 7.7x is currently trading in-line with its industry peers’ ratio, which means if you buy China Unicom (Hong Kong) today, you’d be paying a relatively sensible price for it. In addition to this, it seems like China Unicom (Hong Kong)’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will China Unicom (Hong Kong) generate?

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. With profit expected to grow by 37% over the next couple of years, the future seems bright for China Unicom (Hong Kong). 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? 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 financial strength of the company. 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 an eye 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. At Simply Wall St, we found 1 warning sign for China Unicom (Hong Kong) and we think they deserve your attention.

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.