At HK$191, Is Orient Overseas (International) Limited (HKG:316) Worth Looking At Closely?

Orient Overseas (International) Limited (HKG:316) saw significant share price movement during recent months on the SEHK, rising to highs of HK$245 and falling to the lows of HK$181. 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 Orient Overseas (International)'s current trading price of HK$191 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 Orient Overseas (International)’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 Orient Overseas (International)

What's the opportunity in Orient Overseas (International)?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 6.57% above my intrinsic value, which means if you buy Orient Overseas (International) today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is HK$179.22, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because Orient Overseas (International)’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Orient Overseas (International) look like?

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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Orient Overseas (International), at least in the near future.

What this means for you:

Are you a shareholder? 316 seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on 316 for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on 316 should the price fluctuate below its true value.

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. Case in point: We've spotted 4 warning signs for Orient Overseas (International) you should be mindful of and 1 of these is concerning.

If you are no longer interested in Orient Overseas (International), 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.