Should You Think About Buying Wanhua Chemical Group Co., Ltd. (SHSE:600309) Now?

Today we're going to take a look at the well-established Wanhua Chemical Group Co., Ltd. (SHSE:600309). The company's stock received a lot of attention from a substantial price increase on the SHSE over the last few months. While good news for shareholders, the company has traded much higher in the past year. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Wanhua Chemical Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Wanhua Chemical Group

What's The Opportunity In Wanhua Chemical Group?

Wanhua Chemical Group appears to be overvalued by 32% at the moment, based on our discounted cash flow valuation. The stock is currently priced at CN¥84.90 on the market compared to our intrinsic value of CN¥64.39. Not the best news for investors looking to buy! In addition to this, it seems like Wanhua Chemical Group’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 Wanhua Chemical Group generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. With profit expected to grow by 57% over the next couple of years, the future seems bright for Wanhua Chemical Group. 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? It seems like the market has well and truly priced in 600309’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe 600309 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 an eye on 600309 for a while, 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 positive outlook is encouraging for 600309, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, Wanhua Chemical Group has 3 warning signs (and 1 which is concerning) we think you should know about.

If you are no longer interested in Wanhua Chemical Group, 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.