At CN¥8.48, Is It Time To Put Huafon Chemical Co.,Ltd (SZSE:002064) On Your Watch List?

Huafon Chemical Co.,Ltd (SZSE:002064), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the SZSE over the last few months. The company's trading levels have reached its high for the past year, following the recent bounce in the share price. As a well-established company, which tends to be well-covered by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Huafon ChemicalLtd’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Huafon ChemicalLtd

What's The Opportunity In Huafon ChemicalLtd?

Great news for investors – Huafon ChemicalLtd 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. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. we find that Huafon ChemicalLtd’s ratio of 16.63x is below its peer average of 32.92x, which indicates the stock is trading at a lower price compared to the Chemicals industry. Although, there may be another chance to buy again in the future. This is because Huafon ChemicalLtd’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Huafon ChemicalLtd?

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 53% over the next couple of years, the future seems bright for Huafon ChemicalLtd. 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 002064 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 financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on 002064 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 002064. 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.

If you'd like to know more about Huafon ChemicalLtd as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 1 warning sign for Huafon ChemicalLtd you should be aware of.

If you are no longer interested in Huafon ChemicalLtd, 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.