Lee & Man Paper Manufacturing Limited (HKG:2314), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the SEHK over the last few months. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. As a stock with high coverage by analysts, you could assume any recent changes in the company's outlook is already priced into the stock. However, what if the stock is still a bargain? Today we will analyse the most recent data on Lee & Man Paper Manufacturing's outlook and valuation to see if the opportunity still exists.
What Is Lee & Man Paper Manufacturing Worth?
Great news for investors – Lee & Man Paper Manufacturing 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 Lee & Man Paper Manufacturing's ratio of 10.14x is below its peer average of 16.41x, which indicates the stock is trading at a lower price compared to the Forestry industry. Another thing to keep in mind is that Lee & Man Paper Manufacturing'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 Lee & Man Paper Manufacturing look like?
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. Lee & Man Paper Manufacturing's earnings over the next few years are expected to increase by 59%, 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 2314 is currently below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With a positive 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 capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you've been keeping an eye on 2314 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 2314. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
If you want to dive deeper into Lee & Man Paper Manufacturing, you'd also look into what risks it is currently facing. Case in point: We've spotted 2 warning signs for Lee & Man Paper Manufacturing you should be mindful of and 1 of them shouldn't be ignored.
If you are no longer interested in Lee & Man Paper Manufacturing, 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.