Is China Merchants Port Holdings Company Limited (HKG:144) Potentially Undervalued?

While China Merchants Port Holdings Company Limited (HKG:144) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the SEHK over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at China Merchants Port Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for China Merchants Port Holdings

What is China Merchants Port Holdings worth?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 6.73x is currently trading slightly above its industry peers’ ratio of 5.89x, which means if you buy China Merchants Port Holdings today, you’d be paying a relatively sensible price for it. And if you believe that China Merchants Port Holdings should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. So, is there another chance to buy low in the future? Given that China Merchants Port Holdings’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 Merchants Port Holdings 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. 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. With profit expected to grow by a double-digit 20% over the next couple of years, the outlook is positive for China Merchants Port Holdings. 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? 144’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 144? 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 144, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 144, 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.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of China Merchants Port Holdings.

If you are no longer interested in China Merchants Port Holdings, 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.