Shandong Hualu-Hengsheng Chemical Co., Ltd. (SHSE:600426), might not be a large cap stock, but it saw significant share price movement during recent months on the SHSE, rising to highs of CN¥31.21 and falling to the lows of CN¥25.29. 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 Shandong Hualu-Hengsheng Chemical's current trading price of CN¥25.73 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Shandong Hualu-Hengsheng Chemical's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Is Shandong Hualu-Hengsheng Chemical Still Cheap?

Great news for investors – Shandong Hualu-Hengsheng Chemical is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. we find that Shandong Hualu-Hengsheng Chemical's ratio of 14.16x is below its peer average of 28.58x, which indicates the stock is trading at a lower price compared to the Chemicals industry. Another thing to keep in mind is that Shandong Hualu-Hengsheng Chemical's share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, 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 Shandong Hualu-Hengsheng Chemical 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. Shandong Hualu-Hengsheng Chemical's earnings over the next few years are expected to increase by 55%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? Since 600426 is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive 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 600426 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 600426. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. To that end, you should learn about the 2 warning signs we've spotted with Shandong Hualu-Hengsheng Chemical (including 1 which is concerning).

If you are no longer interested in Shandong Hualu-Hengsheng 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com