While Tangshan Sanyou Chemical Industries Co.,Ltd (SHSE:600409) might not have the largest market cap around , it saw a significant share price rise of 20% in the past couple of months on the SHSE. While good news for shareholders, the company has traded much higher in the past year. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let's examine Tangshan Sanyou Chemical IndustriesLtd's valuation and outlook in more detail to determine if there's still a bargain opportunity.
What Is Tangshan Sanyou Chemical IndustriesLtd Worth?
According to our valuation model, Tangshan Sanyou Chemical IndustriesLtd seems to be fairly priced at around 1.4% below our intrinsic value, which means if you buy Tangshan Sanyou Chemical IndustriesLtd today, you'd be paying a fair price for it. And if you believe that the stock is really worth CN¥5.61, then there's not much of an upside to gain from mispricing. What's more, Tangshan Sanyou Chemical IndustriesLtd's share price may be more stable over time (relative to the market), as indicated by its low beta.
What kind of growth will Tangshan Sanyou Chemical IndustriesLtd generate?
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 70% over the next year, the near-term future seems bright for Tangshan Sanyou Chemical IndustriesLtd. 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? 600409's optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you've been keeping an eye on 600409, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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.
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. While conducting our analysis, we found that Tangshan Sanyou Chemical IndustriesLtd has 1 warning sign and it would be unwise to ignore it.
If you are no longer interested in Tangshan Sanyou Chemical IndustriesLtd, 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.