Stock Valuation: Ping An Insurance (Group) Co. of China Ltd (601318)

Name of Company Country of Origin/ Exchange Traded Sector Stock Price
Financial Services – Insurance – Life – Insurance – Life HKD79.50
@ 30 Sep 2018
COMPANY PROFILE Ping An Insurance (Group) Co. of China Ltd is engaged in providing financial products and services in the area of life insurance, property and casualty insurance. Its services are insurance, banking and asset management, securities brokerage and others.

Founded in 1988, Ping An Insurance is a major provider of financial products and services, with a focus on life insurance and property and casualty insurance. Ping An is China’s second-largest life and P&C insurer. The company strives for an integrated financial services platform comprising insurance, banking, and asset management. Life, P&C, banking, asset management, and fintech contribute 49%, 14%, 26%, 15%, and 0.6% of the company’s pretax profit, respectively, as of mid-2017.

Stock Code 601318
Stock Valuation Below

Ping An Insurance Price to Sales

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 HKD79.50 as at 30 Sep 2018, Ping An Insurance (Group) Co. Of China Ltd is trading at a Price to Sales Ratio of 0.9 times last 12 months sales.  This is a 15.0% discount to current fair Price to Sales Ratio of 1.1 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 or Estimates are from – Thomson Reuters.
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