At HK$2.77, Is Lee & Man Paper Manufacturing Limited (HKG:2314) Worth Looking At Closely?

While Lee & Man Paper Manufacturing Limited (HKG:2314) might not have the largest market cap around , it saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Lee & Man Paper Manufacturing’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

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Is Lee & Man Paper Manufacturing Still Cheap?

According to our valuation model, the stock is currently overvalued by about 34%, trading at HK$2.77 compared to our intrinsic value of HK$2.06. Not the best news for investors looking to buy! Furthermore, Lee & Man Paper Manufacturing’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

See our latest analysis for Lee & Man Paper Manufacturing

What kind of growth will Lee & Man Paper Manufacturing 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. Lee & Man Paper Manufacturing's earnings over the next few years are expected to increase by 24%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? 2314’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe 2314 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 an eye on 2314 for a while, 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 optimistic prospect is encouraging for 2314, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Lee & Man Paper Manufacturing as a business, it's important to be aware of any risks it's facing. Our analysis shows 2 warning signs for Lee & Man Paper Manufacturing (1 is potentially serious!) and we strongly recommend you look at these before investing.

If you are no longer interested in Lee & Man Paper Manufacturing, 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.