Is There Now An Opportunity In City Developments Limited (SGX:C09)?

City Developments Limited (SGX:C09), might not be a large cap stock, but it saw significant share price movement during recent months on the SGX, rising to highs of S$8.35 and falling to the lows of S$7.08. 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$7.46 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.

View our latest analysis for City Developments

What Is City Developments Worth?

According to my 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. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 5.32x is currently trading slightly below its industry peers’ ratio of 9.13x, which means if you buy City Developments today, you’d be paying a reasonable price for it. And if you believe City Developments should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. In addition to this, it seems like City Developments’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. 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? C09 seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk 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 C09, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on C09 for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, 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 gel your views on C09 should the price fluctuate below the industry PE ratio.

If you want to dive deeper into City Developments, you'd also look into what risks it is currently facing. For example, we've found that City Developments has 4 warning signs (2 are significant!) that deserve your attention before going any further with your analysis.

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.