Let's talk about the popular Anhui Gujing Distillery Co., Ltd. (SZSE:000596). The company's shares saw significant share price movement during recent months on the SZSE, rising to highs of CN¥292 and falling to the lows of CN¥253. 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 Anhui Gujing Distillery's current trading price of CN¥257 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 Anhui Gujing Distillery's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Anhui Gujing Distillery
Is Anhui Gujing Distillery Still Cheap?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I've used the price-to-earnings ratio in this instance because there's not enough visibility to forecast its cash flows. The stock's ratio of 31.3x is currently trading in-line with its industry peers' ratio, which means if you buy Anhui Gujing Distillery today, you'd be paying a relatively sensible price for it. So, is there another chance to buy low in the future? Given that Anhui Gujing Distillery'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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Anhui Gujing Distillery look like?
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 70% over the next couple of years, the future seems bright for Anhui Gujing Distillery. 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? It seems like the market has already priced in 000596's positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven't considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at 000596? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you've been keeping an eye on 000596, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 000596, which means it's worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing Anhui Gujing Distillery at this point in time. For example, Anhui Gujing Distillery has 2 warning signs (and 1 which is potentially serious) we think you should know about.
If you are no longer interested in Anhui Gujing Distillery, 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.