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Chow Sang Sang (0116.HK)
09-11-2019, 09:27 AM.
Post: #21
RE: Chow Sang Sang (0116.HK)
Whether a stock is undervalued or not is always a function of the company's future performance.

Hence, a stock which trades several SDs away from its average p/b (or whichever valuation metric) may or may not be an indication of over or undervaluation.

To cite CSS, it does not necessarily follow its p/b of 0.6 will somehow 'magically' return to its average of say, 1.1-1.5. The factors which caused CSS to be priced at p/b of 0.6 will need to be reversed, or perhaps supplanted by other more positive factors, for the p/b to return to the average.

If CSS is mismanaged, or if gold is no longer seen to be a valuable commodity, then its current valuation may be considered expensive. There are a lot more events which can cause CSS to be worth less (or more) in the future, than in the present.

And so investors have to determine whether future events will be positive or negative for any asset they are prospecting.

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