In This Article:
Today we’re going to take a look at the well-established Fosun International Limited (HKG:656). The company’s stock saw a decent share price growth in the teens level on the SEHK over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today I will analyse the most recent data on Fosun International’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for Fosun International
Is Fosun International still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Fosun International’s ratio of 7.51x is trading slightly below its industry peers’ ratio of 7.74x, which means if you buy Fosun International today, you’d be paying a fair price for it. And if you believe that Fosun International should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Fosun International’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Fosun International 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. Fosun International’s earnings over the next few years are expected to increase by 21.5%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? 656’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 656? Will you have enough conviction to buy should the price fluctuate below the true value?