When Should You Buy Hubei Yihua Chemical Industry Co., Ltd. (SZSE:000422)?

While Hubei Yihua Chemical Industry Co., Ltd. (SZSE:000422) might not have the largest market cap around , it led the SZSE gainers with a relatively large price hike in the past couple of weeks. The company is inching closer to its yearly highs following the recent share price climb. As a small cap stock, which tends to lack high analyst coverage, 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? Today we will analyse the most recent data on Hubei Yihua Chemical Industry’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Hubei Yihua Chemical Industry

What Is Hubei Yihua Chemical Industry Worth?

Good news, investors! Hubei Yihua Chemical Industry is still a bargain right now. According to our valuation, the intrinsic value for the stock is CN¥16.50, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. What’s more interesting is that, Hubei Yihua Chemical Industry’s share price is theoretically quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, 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 does the future of Hubei Yihua Chemical Industry look like?

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 more than double over the next couple of years, the future seems bright for Hubei Yihua Chemical Industry. 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? Since 000422 is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With an optimistic 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 undervaluation.

Are you a potential investor? If you’ve been keeping an eye on 000422 for a while, now might be the time to enter the stock. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 000422. 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 buy.

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. For instance, we've identified 4 warning signs for Hubei Yihua Chemical Industry (1 makes us a bit uncomfortable) you should be familiar with.

If you are no longer interested in Hubei Yihua Chemical Industry, 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.