Powerlong Real Estate Holdings Limited (HKG:1238), which is in the real estate business, and is based in China, received a lot of attention from a substantial price increase on the SEHK over the last few months. As a well-established company, which tends to be well-covered by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Powerlong Real Estate Holdings’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Powerlong Real Estate Holdings

Want to participate in a research study? Help shape the future of investing tools and earn a $60 gift card!

Is Powerlong Real Estate Holdings 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-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Powerlong Real Estate Holdings’s ratio of 5.02x is trading slightly below its industry peers’ ratio of 6.37x, which means if you buy Powerlong Real Estate Holdings today, you’d be paying a fair price for it. And if you believe Powerlong Real Estate Holdings should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Powerlong Real Estate Holdings’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.

Can we expect growth from Powerlong Real Estate Holdings?

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. Powerlong Real Estate Holdings’s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in 1238’s positive outlook, 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 1238? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on 1238, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for 1238, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Powerlong Real Estate Holdings. You can find everything you need to know about Powerlong Real Estate Holdings in the latest infographic research report. If you are no longer interested in Powerlong Real Estate Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Thank you for reading.