While Huafon Chemical Co., Ltd. (SZSE:002064) might not be the most widely known stock at the moment, it maintained its current share price over the past couple of month on the SZSE, with a relatively tight range of CN¥6.81 to CN¥7.40. However, does this price actually reflect the true value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Huafon Chemical'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 Huafon Chemical

Is Huafon Chemical Still Cheap?

Great news for investors – Huafon Chemical 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 Huafon Chemical's ratio of 14.87x is below its peer average of 36.77x, which indicates the stock is trading at a lower price compared to the Chemicals industry. However, given that Huafon Chemical's share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Huafon Chemical generate?

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. 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 53% over the next couple of years, the future seems bright for Huafon Chemical. 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 002064 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 financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you've been keeping an eye on 002064 for a while, now might be the time to make a leap. Its prosperous future profit outlook isn't fully reflected in the current share price yet, which means it's not too late to buy 002064. 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 assessment.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For instance, we've identified 3 warning signs for Huafon Chemical (1 doesn't sit too well with us) you should be familiar with.

If you are no longer interested in Huafon Chemical, 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.