Is It Too Late To Consider Buying Central China New Life Limited (HKG:9983)?

While Central China New Life Limited (HKG:9983) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the SEHK. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at Central China New Life’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Central China New Life

What's The Opportunity In Central China New Life?

According to my 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, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Central China New Life’s ratio of 6.14x is trading slightly below its industry peers’ ratio of 6.49x, which means if you buy Central China New Life today, you’d be paying a reasonable price for it. And if you believe that Central China New Life 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. In addition to this, it seems like Central China New Life’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Central China New Life?

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. Central China New Life's earnings over the next few years are expected to increase by 37%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in 9983’s positive 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 9983? 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 9983, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 9983, which means it’s worth further examining 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, Central China New Life has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

If you are no longer interested in Central China New Life, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.