At HK$0.10, Is Beijing Enterprises Clean Energy Group Limited (HKG:1250) Worth Looking At Closely?

While Beijing Enterprises Clean Energy Group Limited (HKG:1250) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the SEHK over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Beijing Enterprises Clean Energy Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Beijing Enterprises Clean Energy Group

What is Beijing Enterprises Clean Energy Group worth?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 18.23x is currently well-above the industry average of 7.83x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since Beijing Enterprises Clean Energy Group’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Beijing Enterprises Clean Energy Group 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. With profit expected to more than double over the next couple of years, the future seems bright for Beijing Enterprises Clean Energy Group. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in 1250’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe 1250 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on 1250 for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for 1250, which means 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. For example, we've found that Beijing Enterprises Clean Energy Group has 3 warning signs (1 shouldn't be ignored!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Beijing Enterprises Clean Energy Group, 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. 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.
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