Stock Valuation: Sunac China Holdings Ltd (1918)

Name of Company Country of Origin/ Exchange Traded Sector Stock Price
SUNAC CHINA HOLDINGS LTD China/
HKSE
Real Estate – Real Estate Services – Real Estate Services HKD24.10
@ 01 Oct 2018
COMPANY PROFILE Sunac China Holdings Ltd develops commercial and residential property in including Beijing, Tianjin, Shanghai, Chongqing, and Hangzhou. The company has also actively developed new regions, including Chengdu, Xi’an, Jinan, Nanjing, and Wuhan.

Sunac China Holdings develops commercial and residential property in China. The company generates most of its revenue by selling the properties it develops. A small portion of the company’s revenue comes from rental income and property management services for properties in Tianjin. The company focuses its development in five main regions of China, including Beijing, Tianjin, Shanghai, Chongqing, and Hangzhou. The company has also actively developed new regions, including Chengdu, Xi’an, Jinan, Nanjing, and Wuhan.

Stock Code 1918
Stock Valuation Below

Sunac China 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 HKD24.10 as at 01 Oct 2018, Sunac China Holdings Ltd is trading at a Price to Sales Ratio of 0.7 times last 12 months sales.  This is at par to its historical average Price to Sales Ratio of 0.7 times.
Is the stock fairly valued? 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.

 

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