Today we're going to take a look at the well-established Hengli Petrochemical Co.,Ltd. (SHSE:600346). The company's stock saw significant share price movement during recent months on the SHSE, rising to highs of CN¥15.22 and falling to the lows of CN¥13.10. 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 Hengli PetrochemicalLtd's current trading price of CN¥13.12 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 Hengli PetrochemicalLtd'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 Hengli PetrochemicalLtd
What Is Hengli PetrochemicalLtd Worth?
Hengli PetrochemicalLtd appears to be overvalued by 25% at the moment, based on my discounted cash flow valuation. The stock is currently priced at CN¥13.12 on the market compared to my intrinsic value of CN¥10.50. This means that the opportunity to buy Hengli PetrochemicalLtd at a good price has disappeared! In addition to this, it seems like Hengli PetrochemicalLtd's share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Hengli PetrochemicalLtd 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. Hengli PetrochemicalLtd's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? 600346's optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe 600346 should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you've been keeping tabs on 600346 for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there's no upside from mispricing. However, the optimistic prospect is encouraging for 600346, which means it's worth diving deeper into other factors in order to take advantage of the next price drop.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. To help with this, we've discovered 3 warning signs (1 is a bit unpleasant!) that you ought to be aware of before buying any shares in Hengli PetrochemicalLtd.
If you are no longer interested in Hengli PetrochemicalLtd, 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.