Is it a good time to buy shares of Ping An Insurance Group Co of China Ltd (SEHK: 2318) now? –
Ping An Insurance Group Co of China Ltd (SEHK: 2318) is an integrated financial services provider in China.
It provides insurance, banking, asset management and internet finance products and services to close to 200 million retail customers.
After hitting a low of around HK$70 in March this year, Ping An’s stock price has recovered by 20% to HK$85.
For those interested in its stock, is it a good time to buy now? Clearly, there is no easy answer to the above question.
Usually, I’d invest in a company if its stock price is cheap, which leads us to another question: Is Ping An’s stock cheap now?
Here, I’ll try to answer the question by comparing Ping An’s current valuation with the market’s valuation.
The two valuation metrics I will focus on are the price-to-book (PB) ratio and price-to-earnings (PE) ratio.
I will be using the iShares MSCI Hong Kong Index Fund (NYSEARCA: EWH) as a proxy for the market.
The iShares MSCI Hong Kong ETF is an exchange-traded fund that tracks the MSCI Hong Kong Index, a market cap-weighted index made up of a diverse selection of small-, large- and mid-cap stocks primarily traded on the Hong Kong Stock Exchange.
Ping An currently has a PB ratio of 2.1x, which is higher than that of the iShares MSCI Hong Kong ETF’s PB ratio of 1.2x. Yet, its PE ratio of 9.0x is lower than the ETF’s PE ratio is 13.0x.
On balance, I think Ping An’s stock is trading at a reasonable valuation due to its low PE ratio, offset partially by its slightly higher PB ratio.
A word on the dividend
In addition to its reasonable valuation, investors should also know that Ping An has been paying dividends for more than a decade.
In 2019, it paid a dividend per share (DPS) of HK$2.2602, which translates to a yield of 2.7% based on the latest share price of HK$85.
Overall, I think Ping An stock is not expensive now thanks to its low PE ratio.
Moreover, investors buying at the current price will receive a reasonable dividend yield versus the market average dividend yield of 2.9%.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Lawrence Nga doesn’t own shares in any companies mentioned.
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