Tangshan Sanyou Chemical Industries Co.,Ltd (SHSE:600409), might not be a large cap stock, but it saw a decent share price growth of 16% on the SHSE over the last few months. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock's share price. However, what if the stock is still a bargain? Today we will analyse the most recent data on Tangshan Sanyou Chemical IndustriesLtd's outlook and valuation to see if the opportunity still exists.

What's The Opportunity In Tangshan Sanyou Chemical IndustriesLtd?

According to our valuation model, the stock is currently overvalued by about 22%, trading at CN¥5.40 compared to our intrinsic value of CN¥4.41. Not the best news for investors looking to buy! Another thing to keep in mind is that Tangshan Sanyou Chemical IndustriesLtd's share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it's there, it may be hard to fall back down into an attractive buying range again.

What does the future of Tangshan Sanyou Chemical IndustriesLtd look like?

Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 62% over the next couple of years, the future seems bright for Tangshan Sanyou Chemical IndustriesLtd. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? 600409's optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe 600409 should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you've been keeping tabs on 600409 for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there's no upside from mispricing. However, the positive outlook is encouraging for 600409, which means it's worth diving deeper into other factors in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Tangshan Sanyou Chemical IndustriesLtd.

If you are no longer interested in Tangshan Sanyou Chemical IndustriesLtd, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.