Shandong Hualu-Hengsheng Chemical Co., Ltd. (SHSE:600426), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the SHSE. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company's outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let's examine Shandong Hualu-Hengsheng Chemical's valuation and outlook in more detail to determine if there's still a bargain opportunity.
Is Shandong Hualu-Hengsheng Chemical Still Cheap?
Good news, investors! Shandong Hualu-Hengsheng Chemical is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. We'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 12.98x is currently well-below the industry average of 36.31x, meaning that it is trading at a cheaper price relative to its peers. What's more interesting is that, Shandong Hualu-Hengsheng Chemical's share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 Shandong Hualu-Hengsheng Chemical?
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 54% over the next couple of years, the future seems bright for Shandong Hualu-Hengsheng 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 600426 is currently trading below the industry PE ratio, it may be a great time to increase 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 600426 for a while, now might be the time to make a leap. 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 assessment.
If you'd like to know more about Shandong Hualu-Hengsheng Chemical as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 1 warning sign for Shandong Hualu-Hengsheng Chemical and you'll want to know about this.
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.
