C.P. Pokphand Co. Ltd. (HKG:43), which is in the food business, and is based in Hong Kong, received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$0.73 at one point, and dropping to the lows of HK$0.58. 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 C.P. Pokphand's current trading price of HK$0.60 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at C.P. Pokphand’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is C.P. Pokphand worth?
Good news, investors! C.P. Pokphand 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 C.P. Pokphand’s ratio of 5.67x is below its peer average of 11.93x, which indicates the stock is trading at a lower price compared to the Food industry. What’s more interesting is that, C.P. Pokphand’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 kind of growth will C.P. Pokphand generate?
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. Though in the case of C.P. Pokphand, it is expected to deliver a negative earnings growth of -13%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? Although 43 is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to 43, 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 an eye on 43 for a while, but hesitant on making the leap, I recommend you research further 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on C.P. Pokphand. You can find everything you need to know about C.P. Pokphand in the latest infographic research report. If you are no longer interested in C.P. Pokphand, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
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