|Name of Company||Country of Origin/ Exchange Traded||Sector||Stock Price|
|CHINA EVERGRANDE GROUP||China/
|Real Estate – Real Estate Services – Real Estate – General||HKD21.95|
|@ 29 Sep 2018|
|COMPANY PROFILE||China Evergrande Group real estate company which is engaged in the development, investment, management, and construction of property and hotel, other property development related services and fast consuming industry in China.
Evergrande is a large real estate developer. In 2017, it was ranked number three by sales value among developers in China. It has projects in around 200 cities across China, and property development accounts for 90% of earnings. The firm also has interests in banking, insurance, tourism, and healthcare. Evergrande was listed in Hong Kong in late 2009. The company is in the process of spinning off its real estate business into a Shenzhen-listed entity. Free float is 25%, with the company’s founder Hui Ka Yan holding the remaining share.
|Stock Valuation Below|
|The Price to Sales Ratio is a commonly used valuation indicator for a stock. While not as popular as the Price to Earnings Ratio, it overcomes some of the limitations of the PE Ratio in that it can be used even when the company is not making a profit or only making minimal profits. However, it should not be used by itself because a company may be achieving sales but not profits.|
|At the price of HKD21.95 as at 29 Sep 2018, China Evergrande Group is trading at a Price to Sales Ratio of 0.5 times last 12 months sales. This is a 6.0% discount to current fair Price to Sales Ratio of 0.6 times.|
|Is the stock undervalued? One should not just look at one indicator to determine the fair value of a stock.|
|ProThinker believes in using a combination of valuation methods to decide whether a stock is over or undervalued? The five ratios we use are Price to Earnings, Price to Sales, Price to Cash Flow, Price to Book and Dividend Yield. We use multiple methods to value a stock because each has its benefits as well as shortcomings. Price to Earnings and Price to Cash Flow Ratios relate stock price to profitability but are meaningless when the comany has negative earnings or cash flows. Price to Sales Ratio is more stable because sales are never negative. However, this does not tell us whether the company is able to sell profitably. Price to Book Ratio gives us an indication as to how much we are paying for the company’s assets but it is not directly related to the company’s profitability. Dividend Yield cannot be used for companies that are paying little to no dividends.|
|While it is important to value stocks based on multiple valuation methods, this often leads to differing views on valuation. One indicator may suggest that a stock is overvalued while another suggest that it is undervalued. This does not help an investor who needs to make a definite decision whether to buy, hold or sell the stock. That is why we advocate the use of a Composite Valuation Indicator, which is derived from the best combination of the five indicators above. A Composite Valuation Indicator will give you ONE conclusion on whether a stock is under or over valued.|
|To find out more about our valuation methodology, click here.|
|Source of Data: Company description, historical financial statements data and price data are from gurufocus.com or moneycontrol.com. Estimates are from marketscreener.com – Thomson Reuters.|
|Disclaimer: This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither ProThinker nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of ProThinker. Copyright(c) 2018. All rights reserved.|