What Does Orient Overseas (International) Limited's (HKG:316) Share Price Indicate?

Orient Overseas (International) Limited (HKG:316), might not be a large cap stock, but it saw a significant share price rise of 21% in the past couple of months on the SEHK. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today we will analyse the most recent data on Orient Overseas (International)’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Orient Overseas (International)

What Is Orient Overseas (International) Worth?

According to our 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. 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 8.86x is trading slightly above its industry peers’ ratio of 7.96x, which means if you buy Orient Overseas (International) today, you’d be paying a relatively sensible price for it. And if you believe Orient Overseas (International) should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that Orient Overseas (International)’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.

Can we expect growth from Orient Overseas (International)?

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. 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. Orient Overseas (International)'s earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in 316’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at 316? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on 316, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 316, 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, Orient Overseas (International) has 4 warning signs (and 2 which make us uncomfortable) we think you should know about.

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.