Is Now The Time To Look At 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 saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. 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. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on China Datang Corporation Renewable Power’s outlook and valuation to see if the opportunity still exists.

See 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 13.11x is currently trading slightly above its industry peers’ ratio of 10.92x, 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, it seems like China Datang Corporation Renewable Power’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.

What does the future of China Datang Corporation Renewable Power look like?

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. With profit expected to grow by 71% over the next couple of years, the future seems bright for China Datang Corporation Renewable Power. 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 already priced in 1798’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 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 optimistic forecast 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.

If you want to dive deeper into China Datang Corporation Renewable Power, you'd also look into what risks it is currently facing. Our analysis shows 2 warning signs for China Datang Corporation Renewable Power (1 makes us a bit uncomfortable!) and we strongly recommend you look at them before investing.

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.