At CN¥4.90, Is Tangshan Sanyou Chemical Industries Co.,Ltd (SHSE:600409) Worth Looking At Closely?

While Tangshan Sanyou Chemical Industries Co.,Ltd (SHSE:600409) might not have the largest market cap around , it saw significant share price movement during recent months on the SHSE, rising to highs of CN¥5.59 and falling to the lows of CN¥4.59. 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 Tangshan Sanyou Chemical IndustriesLtd's current trading price of CN¥4.90 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Tangshan Sanyou Chemical IndustriesLtd’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 Tangshan Sanyou Chemical IndustriesLtd

What's The Opportunity In Tangshan Sanyou Chemical IndustriesLtd?

According to our valuation model, the stock is currently overvalued by about 31%, trading at CN¥4.90 compared to our intrinsic value of CN¥3.74. Not the best news for investors looking to buy! Furthermore, Tangshan Sanyou Chemical IndustriesLtd’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

Can we expect growth from Tangshan Sanyou Chemical IndustriesLtd?

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. Tangshan Sanyou Chemical IndustriesLtd's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

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 above its fair value. However, this brings up another question – is now the right time to sell? If you believe 600409 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 600409 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 600409, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. In terms of investment risks, we've identified 2 warning signs with Tangshan Sanyou Chemical IndustriesLtd, and understanding these should be part of your investment process.

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.