Let's talk about the popular Wanhua Chemical Group Co., Ltd. (SHSE:600309). The company's shares saw significant share price movement during recent months on the SHSE, rising to highs of CN¥97.76 and falling to the lows of CN¥83.88. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Wanhua Chemical Group's current trading price of CN¥87.09 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Wanhua Chemical Group's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for Wanhua Chemical Group
Is Wanhua Chemical Group Still Cheap?
Great news for investors – Wanhua Chemical Group is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. I find that Wanhua Chemical Group's ratio of 17.84x is below its peer average of 35.89x, which indicates the stock is trading at a lower price compared to the Chemicals industry. What's more interesting is that, Wanhua Chemical Group's share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Wanhua Chemical Group generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. With profit expected to grow by 73% over the next couple of years, the future seems bright for Wanhua Chemical Group. 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? Since 600309 is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you've been keeping an eye on 600309 for a while, now might be the time to enter the stock. Its buoyant future profit outlook isn't fully reflected in the current share price yet, which means it's not too late to buy 600309. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
If you'd like to know more about Wanhua Chemical Group as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for Wanhua Chemical Group you should be aware of.
If you are no longer interested in Wanhua Chemical Group, 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.