China Jushi Co., Ltd. (SHSE:600176), 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¥13.07 and falling to the lows of CN¥10.09. 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 China Jushi's current trading price of CN¥10.19 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 China Jushi's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What Is China Jushi Worth?
The share price seems sensible at the moment 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 China Jushi's ratio of 16.49x is trading slightly below its industry peers' ratio of 16.62x, which means if you buy China Jushi today, you'd be paying a decent price for it. And if you believe China Jushi should be trading in this range, then there isn't much room for the share price to grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since China Jushi's share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from China Jushi?
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. China Jushi's earnings over the next few years are expected to increase by 50%, 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? 600176's optimistic future growth appears to have been factored into the current share price, 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 600176? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you've been keeping an eye on 600176, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 600176, 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.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. In terms of investment risks, we've identified 3 warning signs with China Jushi, and understanding them should be part of your investment process.
If you are no longer interested in China Jushi, 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.