Is Now An Opportune Moment To Examine China XLX Fertiliser Ltd. (HKG:1866)?

China XLX Fertiliser Ltd. (HKG:1866), is not the largest company out there, but it saw significant share price movement during recent months on the SEHK, rising to highs of HK$4.48 and falling to the lows of HK$3.14. 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 China XLX Fertiliser's current trading price of HK$3.14 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 China XLX Fertiliser’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 China XLX Fertiliser

What's The Opportunity In China XLX Fertiliser?

According to my valuation model, China XLX Fertiliser seems to be fairly priced at around 12% below my intrinsic value, which means if you buy China XLX Fertiliser today, you’d be paying a fair price for it. And if you believe that the stock is really worth HK$3.57, then there isn’t much room for the share price grow beyond what it’s currently trading. Furthermore, China XLX Fertiliser’s low beta implies that the stock is less volatile than the wider market.

Can we expect growth from China XLX Fertiliser?

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 69% over the next couple of years, the future seems bright for China XLX Fertiliser. 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 1866’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 financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on 1866, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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.

So while earnings quality is important, it's equally important to consider the risks facing China XLX Fertiliser at this point in time. At Simply Wall St, we found 2 warning signs for China XLX Fertiliser and we think they deserve your attention.

If you are no longer interested in China XLX Fertiliser, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.