Is COSCO SHIPPING Ports Limited (HKG:1199) Undervalued After Accounting For Its Future Growth?

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COSCO SHIPPING Ports Limited (HKG:1199) is considered a high growth stock. However its last closing price of HK$7.38 left investors wondering whether this growth has already been factored into the share price. Below I will be talking through a basic metric which will help answer this question.

Check out our latest analysis for COSCO SHIPPING Ports

What can we expect from COSCO SHIPPING Ports in the future?

Investors in COSCO SHIPPING Ports have been patiently waiting for the uptick in earnings. If you believe the analysts covering the stock then the following year will be very interesting. The consensus forecast from 12 analysts is bullish with earnings forecasted to rise significantly from today’s level of $0.0991 to $0.130 over the next three years. This indicates an estimated earnings growth rate of 11% per year, on average, which signals a market-beating outlook in the upcoming years.

Is 1199’s share price justifiable by its earnings growth?

COSCO SHIPPING Ports is available at a price-to-earnings ratio of 9.5x, showing us it is undervalued relative to the current HK market average of 10.89x , and overvalued based on current earnings compared to the Infrastructure industry average of 8.71x .

SEHK:1199 Price Estimation Relative to Market, June 10th 2019
SEHK:1199 Price Estimation Relative to Market, June 10th 2019

We understand 1199 seems to be overvalued based on its current earnings, compared to its industry peers. But, seeing as COSCO SHIPPING Ports is perceived as a high-growth stock, we must also account for its earnings growth, which is captured in the PEG ratio. A PE ratio of 9.5x and expected year-on-year earnings growth of 11% give COSCO SHIPPING Ports a low PEG ratio of 0.88x. Based on this growth, COSCO SHIPPING Ports’s stock can be considered fairly valued , based on the fundamentals.

What this means for you:

1199’s current undervaluation could signal a potential buying opportunity to increase your exposure to the stock, or it you’re a potential investor, now may be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:

  1. Financial Health: Are 1199’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has 1199 been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of 1199’s historicals for more clarity.
  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.