Should You Think About Buying China Datang Corporation Renewable Power Co., Limited (HKG:1798) Now?

China Datang Corporation Renewable Power Co., Limited (HKG:1798), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$3.50 at one point, and dropping to the lows of HK$2.58. 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 China Datang Corporation Renewable Power's current trading price of HK$2.74 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at China Datang Corporation Renewable Power’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for China Datang Corporation Renewable Power

What is China Datang Corporation Renewable Power worth?

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. 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 13.05x is currently trading slightly above its industry peers’ ratio of 8.64x, which means if you buy China Datang Corporation Renewable Power today, you’d be paying a relatively sensible price for it. And if you believe that China Datang Corporation Renewable Power should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. 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.

Can we expect growth from China Datang Corporation Renewable Power?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 92%, 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 track record of its management team. 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 advantageous 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. For example, China Datang Corporation Renewable Power has 2 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

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.