Should You Think About Buying China XLX Fertiliser Ltd. (HKG:1866) Now?

China XLX Fertiliser Ltd. (HKG:1866), is not the largest company out there, but it received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$8.30 at one point, and dropping to the lows of HK$5.63. 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$5.99 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.

View our latest analysis for China XLX Fertiliser

What's the opportunity in China XLX Fertiliser?

China XLX Fertiliser appears to be overvalued by 39% at the moment, based on my discounted cash flow valuation. The stock is currently priced at HK$5.99 on the market compared to my intrinsic value of HK$4.30. Not the best news for investors looking to buy! In addition to this, it seems like China XLX Fertiliser’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, 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 kind of growth will China XLX Fertiliser 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. With profit expected to grow by 56% 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 well and truly priced in 1866’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe 1866 should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on 1866 for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for 1866, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into China XLX Fertiliser, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 4 warning signs for China XLX Fertiliser you should know about.

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.

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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.