Is China BlueChemical Ltd. (HKG:3983) Potentially Undervalued?

China BlueChemical Ltd. (HKG:3983), might not be a large cap stock, but it saw a decent share price growth of 18% on the SEHK over the last few months. The company is inching closer to its yearly highs following the recent share price climb. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today we will analyse the most recent data on China BlueChemical’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for China BlueChemical

What Is China BlueChemical Worth?

The stock seems fairly valued at the moment according to our valuation model. It’s trading around 2.7% below our intrinsic value, which means if you buy China BlueChemical today, you’d be paying a fair price for it. And if you believe that the stock is really worth HK$2.62, then there’s not much of an upside to gain from mispricing. Furthermore, China BlueChemical’s low beta implies that the stock is less volatile than the wider market.

What does the future of China BlueChemical 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 revenue growth of 6.9% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for China BlueChemical, at least in the short term.

What This Means For You

Are you a shareholder? It seems like the market has already priced in 3983’s future outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping an eye on 3983, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook 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. For example, China BlueChemical has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

If you are no longer interested in China BlueChemical, 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.