Is It Time To Consider Buying China Datang Corporation Renewable Power Co., Limited (HKG:1798)?

China Datang Corporation Renewable Power Co., Limited (HKG:1798), is not the largest company out there, but it led the SEHK gainers with a relatively large price hike in the past couple of weeks. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine China Datang Corporation Renewable Power’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for China Datang Corporation Renewable Power

What's The Opportunity In China Datang Corporation Renewable Power?

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 9.73x is currently trading slightly above its industry peers’ ratio of 8.5x, which means if you buy China Datang Corporation Renewable Power today, you’d be paying a relatively reasonable price for it. And if you believe China Datang Corporation Renewable Power should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Furthermore, China Datang Corporation Renewable Power’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What kind of growth will China Datang Corporation Renewable Power generate?

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. China Datang Corporation Renewable Power's earnings over the next few years are expected to increase by 80%, 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? 1798’s optimistic future growth appears to have been factored into the current share price, 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 1798? 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 an eye on 1798, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 1798, 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.

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 1 warning sign for China Datang Corporation Renewable Power and we think they deserve your attention.

If you are no longer interested in China Datang Corporation Renewable Power, 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.