While China Resources Microelectronics Limited (SHSE:688396) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the SHSE over the last few months, increasing to CN¥40.99 at one point, and dropping to the lows of CN¥33.98. 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 Resources Microelectronics' current trading price of CN¥35.30 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 Resources Microelectronics'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 Resources Microelectronics Worth?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Resources Microelectronics's ratio of 47.59x is trading slightly below its industry peers' ratio of 47.59x, which means if you buy China Resources Microelectronics today, you'd be paying a reasonable price for it. And if you believe China Resources Microelectronics 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. In addition to this, it seems like China Resources Microelectronics's share price is quite stable, which could mean there may be less chances to buy low in the future now that it's trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will China Resources Microelectronics generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 67% over the next couple of years, the future seems bright for China Resources Microelectronics. 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 688396'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 track record of its management team. Have these factors changed since the last time you looked at 688396? 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 688396, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 688396, which means it's worth diving deeper into 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 China Resources Microelectronics at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of China Resources Microelectronics.

If you are no longer interested in China Resources Microelectronics, 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.