Why Hengli Petrochemical Co.,Ltd. (SHSE:600346) Could Be Worth Watching

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¥16.52 and falling to the lows of CN¥13.23. 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¥13.95 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's The Opportunity In Hengli PetrochemicalLtd?

Great news for investors – Hengli PetrochemicalLtd 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 12.24x is currently well-below the industry average of 29.25x, meaning that it is trading at a cheaper price relative to its peers. Another thing to keep in mind is that Hengli PetrochemicalLtd’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 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. 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. Hengli PetrochemicalLtd's earnings over the next few years are expected to increase by 51%, 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 600346 is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With a positive profit 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 600346 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 600346. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Be aware that Hengli PetrochemicalLtd is showing 2 warning signs in our investment analysis and 1 of those doesn't sit too well with us...

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com