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When Should You Buy China National Building Material Company Limited (HKG:3323)?
Today we're going to take a look at the well-established China National Building Material Company Limited (HKG:3323). The company's stock led the SEHK gainers with a relatively large price hike in the past couple of weeks. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the companyâs outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Letâs take a look at China National Building Materialâs outlook and value based on the most recent financial data to see if the opportunity still exists.
See our latest analysis for China National Building Material
What is China National Building Material worth?
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. Iâve used the price-to-earnings ratio in this instance because thereâs not enough visibility to forecast its cash flows. The stockâs ratio of 5.07x is currently trading slightly below its industry peersâ ratio of 5.26x, which means if you buy China National Building Material today, youâd be paying a decent price for it. And if you believe that China National Building Material should be trading at this level in the long run, then thereâs not much of an upside to gain over and above other industry peers. Although, there may be an opportunity to buy in the future. This is because China National Building Materialâs beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the companyâs shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of China National Building Material 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 itâs 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. China National Building Material's earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? 3323âs 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 havenât considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at 3323? 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 youâve been keeping tabs on 3323, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 3323, which means itâs 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 if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. At Simply Wall St, we found 2 warning signs for China National Building Material and we think they deserve your attention.
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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.
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About SEHK:3323
China National Building Material
An investment holding company, engages in building material, new materials, and engineering technical services businesses.
Moderate growth potential second-rate dividend payer.