Thinking about what to do with PCCW stock, especially after its lively run over the past few years? You are not alone. Anyone holding or eyeing this name has probably noticed some impressive long-term moves. Sure, PCCW has seen a slight dip of -0.4% in the past week and is down -5.8% over the last month, but if you widen the lens, the picture gets a lot brighter. Year-to-date, the shares are up an eye-catching 16.0%, and if you have been watching for a while, you will know that the stock has surged 27.9% in the past year, 73.5% over three years, and a strong 63.3% across the last five years.
This kind of performance naturally sparks questions, especially with broader market developments influencing companies across the board. Is PCCW now a growth story with rising investor optimism, or are there risks flying under the radar? When it comes to deciding your next step, valuation really matters, and here is where things get interesting. PCCW’s latest value score is 4 out of 6, meaning the company is undervalued on four key checks based on common valuation methods.
In the coming sections, I will break down how analysts typically judge whether a company like PCCW offers good value at its current price using tried-and-tested approaches. And for anyone wondering if there is an even smarter way to look at valuation, stick with me to the end for a perspective most investors overlook.
Why PCCW is lagging behind its peers
The Discounted Cash Flow (DCF) model is a popular way for analysts to estimate a company’s intrinsic value by projecting its future cash flows and discounting them back to the present. This method relies on two main ideas: forecasting how much cash a company will generate each year, and then determining what all those future cash flows would be worth today.
For PCCW, the latest free cash flow (FCF) stands at HK$3.52 billion. Over the next decade, the company’s FCF is projected to fluctuate. Estimates suggest it may reach approximately HK$2.99 billion by 2035. While analysts typically provide five-year estimates grounded in detailed research, longer-term projections are extrapolated and should be interpreted with some caution.
Based on these forward-looking cash flows, the model calculates an intrinsic value of HK$6.94 per share. When compared to the current share price, this figure implies that PCCW is trading at a 24.8% discount. This means the market price is well below what the company’s fundamentals suggest it is worth.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests PCCW is undervalued by 24.8%. Track this in your watchlist or portfolio, or discover more undervalued stocks.
The Price-to-Sales (P/S) ratio is commonly used for valuing companies when profits may be volatile or negative, as it focuses on revenues rather than earnings or book value. For a service-oriented business like PCCW, which operates in the Telecom sector where profitability may fluctuate but revenues remain substantial, the P/S ratio provides a more consistent gauge of valuation relative to peers.
Market expectations for growth and perceived risk play a big role in shaping what a “normal” or “fair” P/S multiple should look like. Faster-growing companies and those in lower-risk markets often enjoy higher ratios, while mature or riskier firms see lower figures. Benchmarks matter, so it is essential to view PCCW’s P/S in context.
PCCW currently trades at a P/S ratio of 1.04x, slightly below the peer average of 1.42x and the industry’s 1.36x. However, rather than relying solely on these yardsticks, Simply Wall St’s proprietary Fair Ratio takes the analysis further. The Fair Ratio, calculated at 1.01x for PCCW, blends in growth outlooks, risk, profit margins, industry characteristics, and market cap. This deeper approach provides a more tailored benchmark than broad comparisons, which can generalize across different business models and risk profiles.
When we put it all together, PCCW’s actual P/S ratio (1.04x) is just a fraction above its Fair Ratio (1.01x), well within the 0.10 range that indicates the valuation is balanced.
Result: ABOUT RIGHT
PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is your personal story about PCCW, built on your assumptions about its future revenue, earnings, and margins, which connects the company’s business outlook with your own financial forecast and fair value estimate. Rather than just relying on traditional ratios or analyst targets, Narratives help you define what matters most, make your estimates visible, and see how they directly impact whether now is a good time to buy, hold, or sell.
This approach is simple and accessible, available to all investors within the Simply Wall St Community page. It is the same tool millions of other users rely on for their decisions. Narratives dynamically update whenever new information, such as earnings or industry news, emerges, keeping your view current and relevant.
For example, one investor might model strong streaming growth and believe that fair value is HK$5.30 per share, while another expects lower earnings due to competition and sees fair value closer to HK$0.95. This reveals not just a number, but the distinct story, outlook, and risk tolerance behind each decision.
Do you think there’s more to the story for PCCW? Create your own Narrative to let the Community know!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include 0008.HK.
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