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Henderson Land Development Company Limited (HKG:12) saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Henderson Land Development’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for Henderson Land Development
What's the opportunity in Henderson Land Development?
The stock seems fairly valued at the moment according to my relative valuation model. 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 Henderson Land Development’s ratio of 6.82x is trading slightly above its industry peers’ ratio of 6.56x, which means if you buy Henderson Land Development today, you’d be paying a relatively reasonable price for it. And if you believe Henderson Land Development should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, Henderson Land Development’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
Can we expect growth from Henderson Land Development?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Though in the case of Henderson Land Development, it is expected to deliver a highly negative earnings growth in the next few years, 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? 12 seems fairly priced 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 12, take a look at whether its fundamentals have changed.