Is HSBC Holdings plc overpriced at 730p per share?

Does HSBC Holdings plc (LON:HSBA) (HSBA.L) lack a margin of safety at its current price level?

HSBC share price
HSBC share price

With HSBC Holdings plc (LON:HSBA) (HSBA.L) trading at 730p per share, I’m considering whether it has investment potential for the long run.

The company is currently in the middle of a period of change. It has decided to pivot towards Asia, while at the same time trying to reinvest for future growth.

Both of these changes are sound in my opinion. The Asian economy continues to offer relatively high growth rates to my mind, and the bank could capitalise on this over the medium term.

For instance, in China there is set to be a continued move towards a more consumer-focused economy. This could mean that demand for banking services increases. Further, over the coming years higher wage growth means that demand for financial services products could gain an additional boost.

Therefore, HSBC’s decision to invest in its operations could help to make it more efficient and better placed to capitalise on the growth potential it has in its key region.

With the stock having a PE ratio of around 15, it may appear to be generously valued. However, given what I feel is a strong growth outlook over a long-term timeframe, I believe it could still offer a margin of safety.

Furthermore, HSBC continues to offer a diverse business model with exposure to a wide range of economies. Its 5%+ dividend yield also suggests that it may offer a relatively impressive total return over the coming years.

Sure, the business remains less efficient than many of its large-cap banking peers. And with a change in its management team, investor sentiment could be held back to some degree in the short run.

But over the long term the company appears to have a bright future in my eyes. It seems to have investment appeal at its current share price following its 7% gain over the last 12 months.

About Robert Stephens 3395 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email or use one of the other contact methods available on the 'Contact Us' page