On Monday, Chunghwa Telecom Co. Ltd (TAI:2412) shares edged higher 1.37% after announcing its most recent quarterly results. The company said its fiscal Q3 net income attributable to common shareholders increased by 12.8% from the same quarter a year ago.
The company posted FQ3 earnings per share of $0.44, beating the consensus analyst expectation of $0.35. On the other hand, revenue for the quarter declined slightly by 2.5% from the same quarter a year ago to $1.838 billion, slightly ahead of the average for analyst estimates of $1.822 billion.
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Chunghwa reported growth in mobile communications and internet revenues, which helped offset declines in domestic and international fixed communications revenues.
Is Chunghwa a safe stock to buy?
From an investment perspective, Chunghwa shares trade at a reasonable P/E ratio of 24.84, making it a potential target for value investors. However, with a price-earnings growth (PEG ratio of 17.74, Chunghwa looks steeply valued for growth investors.
Therefore, although its trailing P/E ratio seems reasonable, it could be a potential value trap due to its declining revenues and weak growth prospects.
Technically, Chunghwa shares seem to be trading within a consolidative triangle formation in the intraday chart. As a result, the stock could be nearing a potential breakout, creating an exciting opportunity for investors.
Based on the company’s recent results, it looks like a bullish breakout is more likely, but given its long-term outlook, the stock could also plunge.
Therefore, investors could target profits for a potential upward breakout at about $40.00, while a downward breakout could find support at $39.00.
Is it time to buy?
In summary, with Chunghwa shares gaining slightly after Monday’s earnings beat, it seems like a perfect opportunity to buy.
However, investors should also be cautious of the company’s discouraging growth outlook and steep valuation before betting on a bullish breakout.
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