Why China National Building Material Company Limited (HKG:3323) Could Be Worth Watching

China National Building Material Company Limited (HKG:3323), might not be a large cap stock, but it saw significant share price movement during recent months on the SEHK, rising to highs of HK$6.14 and falling to the lows of HK$5.01. 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 National Building Material's current trading price of HK$5.31 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at China National Building Material’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

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What Is China National Building Material Worth?

Great news for investors – China National Building Material is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’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 6.1x is currently well-below the industry average of 13.79x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, China National Building Material’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Check out our latest analysis for China National Building Material

Can we expect growth from China National Building Material?

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. However, with a negative profit growth of -1.9% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for China National Building Material. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although 3323 is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. We recommend you think about whether you want to increase your portfolio exposure to 3323, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on 3323 for some time, but hesitant on making the leap, we recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Our analysis shows 2 warning signs for China National Building Material (1 doesn't sit too well with us!) and we strongly recommend you look at them before investing.

If you are no longer interested in China National Building Material, 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.