Is Now The Time To Look At Buying Orient Overseas (International) Limited (HKG:316)?

Today we're going to take a look at the well-established Orient Overseas (International) Limited (HKG:316). The company's stock saw a significant share price rise of 36% in the past couple of months on the SEHK. While good news for shareholders, the company has traded much higher in the past year. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at Orient Overseas (International)’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Orient Overseas (International)

What's The Opportunity In Orient Overseas (International)?

Great news for investors – Orient Overseas (International) is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. we find that Orient Overseas (International)’s ratio of 7.83x is below its peer average of 14.35x, which indicates the stock is trading at a lower price compared to the Shipping industry. Although, there may be another chance to buy again 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. 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. However, with a negative profit growth of -7.9% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Orient Overseas (International). This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although 316 is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to 316, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on 316 for a while, but hesitant on making the leap, we recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. When we did our research, we found 4 warning signs for Orient Overseas (International) (2 are potentially serious!) that we believe deserve your full attention.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com