At HK$2.05, Is Metallurgical Corporation of China Ltd. (HKG:1618) Worth Looking At Closely?

Today we're going to take a look at the well-established Metallurgical Corporation of China Ltd. (HKG:1618). The company's stock received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$2.41 at one point, and dropping to the lows of HK$1.88. 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 Metallurgical Corporation of China's current trading price of HK$2.05 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 Metallurgical Corporation of China’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 Metallurgical Corporation of China

Is Metallurgical Corporation of China still cheap?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Metallurgical Corporation of China’s ratio of 4.22x is trading slightly below its industry peers’ ratio of 8.9x, which means if you buy Metallurgical Corporation of China today, you’d be paying a decent price for it. And if you believe that Metallurgical Corporation of China should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, it seems like Metallurgical Corporation of China’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Metallurgical Corporation of China look like?

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. With profit expected to grow by 49% over the next couple of years, the future seems bright for Metallurgical Corporation of China. 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? It seems like the market has already priced in 1618’s positive outlook, with shares trading around industry price multiples. 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 1618? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on 1618, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 1618, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Metallurgical Corporation of China as a business, it's important to be aware of any risks it's facing. For example - Metallurgical Corporation of China has 1 warning sign we think you should be aware of.

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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.