Why City Developments Limited (SGX:C09) Could Be Worth Watching

City Developments Limited (SGX:C09), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the SGX over the last few months, increasing to S$8.28 at one point, and dropping to the lows of S$7.14. 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$7.18 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's the opportunity in City Developments?

Great news for investors – City Developments is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is SGD10.46, but it is currently trading at S$7.18 on the share market, meaning that there is still an opportunity to buy now. What’s more interesting is that, City Developments’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 City Developments generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. In City Developments' case, its revenues over the next few years are expected to grow by 92%, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since C09 is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.

Are you a potential investor? If you’ve been keeping an eye on C09 for a while, now might be the time to enter the stock. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy C09. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.

So while earnings quality is important, it's equally important to consider the risks facing City Developments at this point in time. Case in point: We've spotted 1 warning sign for City Developments you should be aware of.

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This article by Simply Wall St is general in nature. 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.
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