What Is China BlueChemical Ltd.'s (HKG:3983) Share Price Doing?

China BlueChemical Ltd. (HKG:3983), is not the largest company out there, but it received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$2.24 at one point, and dropping to the lows of HK$1.99. 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 BlueChemical's current trading price of HK$1.99 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 China BlueChemical’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's The Opportunity In China BlueChemical?

According to our 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, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that China BlueChemical’s ratio of 7.99x is trading slightly below its industry peers’ ratio of 9.56x, which means if you buy China BlueChemical today, you’d be paying a decent price for it. And if you believe China BlueChemical should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like China BlueChemical’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

Check out our latest analysis for China BlueChemical

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. Although value investors would argue that it’s 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. However, with a relatively muted revenue growth of 1.6% 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 growth outlook, with shares trading around industry price multiples. 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 3983? 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 3983, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. At Simply Wall St, we found 2 warning signs for China BlueChemical and we think they deserve your attention.

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.