Is Now An Opportune Moment To Examine Lee & Man Paper Manufacturing Limited (HKG:2314)?

Lee & Man Paper Manufacturing Limited (HKG:2314), 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$2.37 and falling to the lows of HK$2.06. 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$2.06 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.

See our latest analysis for Lee & Man Paper Manufacturing

What's The Opportunity In Lee & Man Paper Manufacturing?

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 Lee & Man Paper Manufacturing’s ratio of 12.76x is trading in-line with its industry peers’ ratio, which means if you buy Lee & Man Paper Manufacturing today, you’d be paying a relatively sensible price for it. 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. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

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. 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 more than double over the next couple of years, the future seems bright for Lee & Man Paper Manufacturing. 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? 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 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 tabs on 2314, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 2314, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To that end, you should learn about the 2 warning signs we've spotted with Lee & Man Paper Manufacturing (including 1 which makes us a bit uncomfortable).

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.