At HK$5.98, Is It Time To Put Shenzhen International Holdings Limited (HKG:152) On Your Watch List?

While Shenzhen International Holdings Limited (HKG:152) might not have the largest market cap around , it saw significant share price movement during recent months on the SEHK, rising to highs of HK$6.92 and falling to the lows of HK$5.45. 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 Shenzhen International Holdings' current trading price of HK$5.98 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Shenzhen International Holdings’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 Shenzhen International Holdings

What's The Opportunity In Shenzhen International Holdings?

Shenzhen International Holdings is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. We’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 18.72x is currently well-above the industry average of 6.66x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, Shenzhen International Holdings’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

Can we expect growth from Shenzhen International Holdings?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Shenzhen International Holdings' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in 152’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe 152 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on 152 for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for 152, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, we've found that Shenzhen International Holdings has 4 warning signs (1 is significant!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Shenzhen International 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.