Is Kumho Petro Chemical Co.,Ltd (KRX:011780) Potentially Undervalued?

Kumho Petro Chemical Co.,Ltd (KRX:011780), 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 KOSE. While good news for shareholders, the company has traded much higher in the past year. As a 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? Today we will analyse the most recent data on Kumho Petro ChemicalLtd’s outlook and valuation to see if the opportunity still exists.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

What's The Opportunity In Kumho Petro ChemicalLtd?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that Kumho Petro ChemicalLtd’s ratio of 12.71x is trading slightly below its industry peers’ ratio of 13.46x, which means if you buy Kumho Petro ChemicalLtd today, you’d be paying a reasonable price for it. And if you believe Kumho Petro ChemicalLtd should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like Kumho Petro ChemicalLtd’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.

Check out our latest analysis for Kumho Petro ChemicalLtd

What kind of growth will Kumho Petro ChemicalLtd generate?

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. Kumho Petro ChemicalLtd's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? A011780’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 A011780? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on A011780, 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 A011780, which means it’s worth diving deeper into 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. In terms of investment risks, we've identified 2 warning signs with Kumho Petro ChemicalLtd, and understanding them should be part of your investment process.

If you are no longer interested in Kumho Petro ChemicalLtd, 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.