At NT$27.55, Is International CSRC Investment Holdings Co., Ltd. (TPE:2104) Worth Looking At Closely?

International CSRC Investment Holdings Co., Ltd. (TPE:2104), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the TSEC. 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 International CSRC Investment Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for International CSRC Investment Holdings

What is International CSRC Investment Holdings worth?

International CSRC Investment Holdings is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that International CSRC Investment Holdings’s ratio of 36.78x is above its peer average of 20.39x, which suggests the stock is trading at a higher price compared to the Chemicals industry. Another thing to keep in mind is that International CSRC Investment Holdings’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.

Can we expect growth from International CSRC Investment Holdings?

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. Though in the case of International CSRC Investment Holdings, it is expected to deliver a relatively unexciting earnings growth of 4.2%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for International CSRC Investment Holdings, at least in the near term.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in 2104’s outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe 2104 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 tabs on 2104 for some time, 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 growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing International CSRC Investment Holdings at this point in time. In terms of investment risks, we've identified 1 warning sign with International CSRC Investment Holdings, and understanding this should be part of your investment process.

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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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