At HK$3.34, Is It Time To Put Lee & Man Paper Manufacturing Limited (HKG:2314) On Your Watch List?

While Lee & Man Paper Manufacturing Limited (HKG:2314) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the SEHK, rising to highs of HK$3.90 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 Lee & Man Paper Manufacturing's current trading price of HK$3.34 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 Lee & Man Paper Manufacturing’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 Lee & Man Paper Manufacturing

Is Lee & Man Paper Manufacturing Still Cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 12.14x is currently trading slightly above its industry peers’ ratio of 11.61x, which means if you buy Lee & Man Paper Manufacturing today, you’d be paying a relatively reasonable price for it. And if you believe that Lee & Man Paper Manufacturing should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. In addition to this, it seems like Lee & Man Paper Manufacturing’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Lee & Man Paper Manufacturing look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Lee & Man Paper Manufacturing's earnings over the next few years are expected to increase by 97%, 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 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 2314? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on 2314, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 2314, 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.

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. Every company has risks, and we've spotted 3 warning signs for Lee & Man Paper Manufacturing you should know about.

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.