Should You Buy China Mobile Limited (HKG:941) When Prices Drop?

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Stock market crashes are an opportune time to buy. High quality companies, such as China Mobile Limited, are impacted by general market panic and sell-off, but the fundamentals of these companies stay the same. In other words, now is the time to buy strong, well-proven stocks at an attractive discount.

View our latest analysis for China Mobile

China Mobile Limited provides mobile telecommunications and related services in Mainland China and Hong Kong. Started in 1997, and headed by CEO Yue Li, the company employs 459.15k people and with the company’s market capitalisation at HK$1.4t, we can put it in the large-cap stocks category. Bear market volatility can have a short-term impact on large, well-established companies, but in the long-run, these businesses are likely to prevail. This is because fundamentally, nothing has changed. A fall in share price is hardly detrimental to its financial health and business operations. So, large-cap stocks are a safe bet to buy more of when the stock market is selling off.

SEHK:941 Historical Debt, June 8th 2019
SEHK:941 Historical Debt, June 8th 2019

Having high levels of debt can put pressure on companies during downturns since they have to continuously service their debt payments and interest costs. This means they need to maintain enough cash-on-hand for these expenses as well as maintain a cash cushion for unforeseen circumstances, which can get costly. In China Mobile’s case, they have no debt on the books, which eliminates short-term debt pressures highly-levered companies may face. Also with a current cash holding of CN¥426b, China Mobile’s cash position is within a healthy range and more than sufficient to cover other upcoming liabilities, which means 941 is financially robust in the face of a volatile market.

SEHK:941 Income Statement, June 8th 2019
SEHK:941 Income Statement, June 8th 2019

941’s profit growth over the previous five years has been positive, with an average annual rate of 0.8%, outperfoming the industry growth rate of -9.2%. It has also returned an ROE of 11% recently, above the industry return of 11%. Characteristics I value in a long term investment are proven in China Mobile, and I can continue to sleep easy at night with the stock as part of my portfolio.

Next Steps:

Whether you’re convinced or not, the key takeaway here is that every stock gets hit in a bear market, but not every stock deserves the blow. When prices are dropping like flies, now is the time to do your research and buy at a discount. China Mobile tick the boxes in terms of its scale, financial health and proven track record, but there are a few other things I have yet to consider. Below I’ve compiled a list of factors for you to continue your reading before you buy:
  1. Future Outlook: What are well-informed industry analysts predicting for 941’s future growth? Take a look at our free research report of analyst consensus for 941’s outlook.
  2. Valuation: What is 941 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether 941 is currently mispriced by the market.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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.

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. Thank you for reading.