Should You Think About Buying Anhui Conch Cement Company Limited (HKG:914) Now?

Anhui Conch Cement Company Limited (HKG:914) saw significant share price movement during recent months on the SEHK, rising to highs of HK$31.40 and falling to the lows of HK$27.30. 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 Anhui Conch Cement's current trading price of HK$29.10 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Anhui Conch Cement’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for Anhui Conch Cement

Is Anhui Conch Cement Still Cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’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 5.81x is currently trading slightly below its industry peers’ ratio of 7.42x, which means if you buy Anhui Conch Cement today, you’d be paying a decent price for it. And if you believe that Anhui Conch Cement should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, it seems like Anhui Conch Cement’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.

Can we expect growth from Anhui Conch Cement?

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. Though in the case of Anhui Conch Cement, it is expected to deliver a negative earnings growth of -3.2%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Currently, 914 appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on 914, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on 914 for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on 914 should the price fluctuate below the industry PE ratio.

So while earnings quality is important, it's equally important to consider the risks facing Anhui Conch Cement at this point in time. To that end, you should learn about the 2 warning signs we've spotted with Anhui Conch Cement (including 1 which is a bit concerning).

If you are no longer interested in Anhui Conch Cement, 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.