At S$7.12, Is It Time To Put City Developments Limited (SGX:C09) On Your Watch List?

While City Developments Limited (SGX:C09) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the SGX over the last few months, increasing to S$7.41 at one point, and dropping to the lows of S$6.67. 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 City Developments' current trading price of S$7.12 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 City Developments’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 City Developments

Is City Developments Still Cheap?

Good news, investors! City Developments is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that City Developments’s ratio of 5.07x is below its peer average of 12.63x, which indicates the stock is trading at a lower price compared to the Real Estate industry. What’s more interesting is that, City Developments’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What does the future of City Developments look like?

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. 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 City Developments, at least in the near future.

What This Means For You

Are you a shareholder? Although C09 is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to C09, 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 tabs on C09 for some time, but hesitant on making the leap, I recommend you dig deeper 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Be aware that City Developments is showing 4 warning signs in our investment analysis and 2 of those are potentially serious...

If you are no longer interested in City Developments, 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.