Is Now An Opportune Moment To Examine Wan Hai Lines Ltd. (TPE:2615)?

Wan Hai Lines Ltd. (TPE:2615), might not be a large cap stock, but it led the TSEC gainers with a relatively large price hike in the past couple of weeks. As a NT$96b market-cap stock, it seems odd Wan Hai Lines is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Today I will analyse the most recent data on Wan Hai Lines’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Wan Hai Lines

What's the opportunity in Wan Hai Lines?

The share price seems sensible at the moment according to my price multiple model, where I compare 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 Wan Hai Lines’s ratio of 19.76x is trading slightly above its industry peers’ ratio of 15.55x, which means if you buy Wan Hai Lines today, you’d be paying a relatively reasonable price for it. And if you believe that Wan Hai Lines should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. In addition to this, it seems like Wan Hai Lines’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.

Can we expect growth from Wan Hai Lines?

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. With revenues expected to grow by a double-digit 12% in the upcoming year, the outlook is positive for Wan Hai Lines. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? 2615’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at 2615? 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 an eye on 2615, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 2615, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 2 warning signs for Wan Hai Lines 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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