Should You Investigate Shede Spirits Co., Ltd. (SHSE:600702) At CN¥53.46?

While Shede Spirits Co., Ltd. (SHSE:600702) 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¥82.90 at one point, and dropping to the lows of CN¥53.46. 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 Shede Spirits' current trading price of CN¥53.46 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 Shede Spirits’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Shede Spirits

Is Shede Spirits Still Cheap?

Great news for investors – Shede Spirits 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. 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 15.43x is currently well-below the industry average of 21.37x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Shede Spirits’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.

What does the future of Shede Spirits 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. However, with a negative profit growth of -3.8% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Shede Spirits. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although 600702 is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to 600702, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on 600702 for a while, but hesitant on making the leap, we recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you'd like to know more about Shede Spirits as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 3 warning signs we've spotted with Shede Spirits (including 1 which is significant).

If you are no longer interested in Shede Spirits, 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.