Is Now An Opportune Moment To Examine Chutian Dragon Co., Ltd. (SZSE:003040)?

Chutian Dragon Co., Ltd. (SZSE:003040), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the SZSE. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. As a small cap stock, hardly covered by any analysts, 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 Chutian Dragon’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Chutian Dragon

What Is Chutian Dragon Worth?

According to our valuation model, Chutian Dragon seems to be fairly priced at around 9.6% below our intrinsic value, which means if you buy Chutian Dragon today, you’d be paying a reasonable price for it. And if you believe the company’s true value is CN¥13.27, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Chutian Dragon’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Chutian Dragon 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. Chutian Dragon'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? It seems like the market has already priced in 003040’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on 003040, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, 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. Case in point: We've spotted 2 warning signs for Chutian Dragon you should be mindful of and 1 of them shouldn't be ignored.

If you are no longer interested in Chutian Dragon, 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.