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Does China Telecom (CHA) Look To Be A Great Stock For Value Investors?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put China Telecom Corp Ltd (CHA - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, China Telecom has a trailing twelve months PE ratio of 14.69, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 20.05. If we focus on the stock’s long-term PE trend, the current level puts China Telecom’s current PE ratio below its midpoint over the past five years, with the number having risen rapidly over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Wire line Non-US industry’s trailing twelve months PE ratio, which stands at 32.6. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that China Telecom has a forward PE ratio (price relative to this year’s earnings) of just 13.59, so it is fair to say that a slightly more value-oriented path may be ahead for China Telecom stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, China Telecom has a P/S ratio of about 0.75. This is lower than the S&P 500 average, which comes in at 3.11 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
If anything, CHA is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, China Telecom currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes China Telecom a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio, which is another great indicator of value, comes in at 3.11. This compares favorably with the industry average of 5.5. Clearly, CHA is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though China Telecom might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘C’ and a Momentum score of ‘C’. This gives CHA a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been pretty encouraging. The current year has seen one estimate going higher in the past sixty days compared to one lower, while the next year estimate has seen one upward and no downward movement in the same time period.
This has had just a small impact on the consensus estimate as the current quarter consensus estimate has inched up by 0.3% in the past two months, while the full year estimate has increased by 9.6%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Despite having a bullish trend, China Telecomholds a Zacks Rank #3 (Hold). This indicates that analysts have some apprehensions about the stock in the immediate future. Thus, we are looking for in-line performance from the company in the near term..
Bottom Line
China Telecom is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 23% out of more than 250 industries) further strengthens its growth potential.
So, despite a Zacks Rank #3, we believe that bullish analyst sentiment and favorable industry factors make this value stock a compelling pick.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Does China Telecom (CHA) Look To Be A Great Stock For Value Investors?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put China Telecom Corp Ltd (CHA - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, China Telecom has a trailing twelve months PE ratio of 14.69, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 20.05. If we focus on the stock’s long-term PE trend, the current level puts China Telecom’s current PE ratio below its midpoint over the past five years, with the number having risen rapidly over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Wire line Non-US industry’s trailing twelve months PE ratio, which stands at 32.6. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that China Telecom has a forward PE ratio (price relative to this year’s earnings) of just 13.59, so it is fair to say that a slightly more value-oriented path may be ahead for China Telecom stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, China Telecom has a P/S ratio of about 0.75. This is lower than the S&P 500 average, which comes in at 3.11 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
If anything, CHA is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, China Telecom currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes China Telecom a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio, which is another great indicator of value, comes in at 3.11. This compares favorably with the industry average of 5.5. Clearly, CHA is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though China Telecom might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘C’ and a Momentum score of ‘C’. This gives CHA a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been pretty encouraging. The current year has seen one estimate going higher in the past sixty days compared to one lower, while the next year estimate has seen one upward and no downward movement in the same time period.
This has had just a small impact on the consensus estimate as the current quarter consensus estimate has inched up by 0.3% in the past two months, while the full year estimate has increased by 9.6%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
China Telecom Corp Ltd Price and Consensus
China Telecom Corp Ltd Price and Consensus | China Telecom Corp Ltd Quote
Despite having a bullish trend, China Telecomholds a Zacks Rank #3 (Hold). This indicates that analysts have some apprehensions about the stock in the immediate future. Thus, we are looking for in-line performance from the company in the near term..
Bottom Line
China Telecom is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 23% out of more than 250 industries) further strengthens its growth potential.
So, despite a Zacks Rank #3, we believe that bullish analyst sentiment and favorable industry factors make this value stock a compelling pick.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>