Sinopec Shanghai Petrochemical Company Limited (HKG:338), which is in the chemicals business, and is based in China, saw a decent share price growth in the teens level on the SEHK over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine Sinopec Shanghai Petrochemical’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What’s the opportunity in Sinopec Shanghai Petrochemical?Great news for investors – Sinopec Shanghai Petrochemical is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is HK$6.46, but it is currently trading at HK$4.05 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because Sinopec Shanghai Petrochemical’s 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 company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of Sinopec Shanghai Petrochemical look like?Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 relatively muted profit growth of 1.6% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Sinopec Shanghai Petrochemical, at least in the short term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since 338 is currently undervalued, it may be a great time to increase your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on 338 for a while, now might be the time to make a leap. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 338. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Sinopec Shanghai Petrochemical. You can find everything you need to know about Sinopec Shanghai Petrochemical in the latest infographic research report. If you are no longer interested in Sinopec Shanghai Petrochemical, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.