China Mobile (CHL) is the largest mobile carrier in the world by number of subscribers. What makes this Chinese stock interesting right now is that despite its blue chip status, the stock looks undervalued.
From the chart below, it is shown that the current P/E ratio has fallen well below the 2007 to 2008 average. Although this indicates that the market is pessimistic about CHL’s future performance, the most recent 12 trailing months’ P/E ratio shows that CHL continues to be on track with the wireless telecommunications services industry benchmark, consistently moving a few points around the industry ratio.
Since its incorporation in 1997, CHL has had positive growth rates in terms of sales (TTM) of above 10%. In fact, the current growth rate showing for 2008/09 is generally lower than growth rates experienced in previous years. In comparison, the industry standard for growth rates for sales shows a decline. This vast difference could be due to CHL’s up and coming projects and venture in the region with a dominance that companies in other countries may not have.
CHL’s lower debt to equity ratio is a sign that it is relatively strong in financing its activities compared to other industry competitors. As shown in the chart below, CHL initially (for a few years) financed large parts of its operations with debt causing a peak in the corresponding ratio. This has fallen tremendously. However, the industry’s ratio is much higher, signally that CHL could be a lot more stable financially.
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