Is Orient Overseas (International) Limited (HKG:316) Potentially Undervalued?

Orient Overseas (International) Limited (HKG:316), is not the largest company out there, but it saw significant share price movement during recent months on the SEHK, rising to highs of HK$108 and falling to the lows of HK$91.90. 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$97.25 reflective of the actual value of the mid-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.

View our latest analysis for Orient Overseas (International)

What Is Orient Overseas (International) Worth?

The stock is currently trading at HK$97.25 on the share market, which means it is overvalued by 25% compared to my intrinsic value of HK$77.79. This means that the buying opportunity has probably disappeared for now. But, is there another opportunity to buy low in the future? Since Orient Overseas (International)’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Orient Overseas (International) generate?

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 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? If you believe 316 should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to reduce your total portfolio risk. 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 316 for a while, now may not be the best time to enter into the stock. The company’s price has climbed passed its true value, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?

So while earnings quality is important, it's equally important to consider the risks facing Orient Overseas (International) at this point in time. When we did our research, we found 3 warning signs for Orient Overseas (International) (2 shouldn't be ignored!) 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.