Sinopec Shanghai Petrochemical Company Limited (SEHK:338) saw a decent share price growth in the teens level on the SEHK over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Sinopec Shanghai Petrochemical’s outlook and value based on the most recent financial data to see if the opportunity still exists. See our latest analysis for Sinopec Shanghai Petrochemical
What is Sinopec Shanghai Petrochemical worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 6% above my intrinsic value, which means if you buy Sinopec Shanghai Petrochemical today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth HK$4.6, then there isn’t really any room for the share price grow beyond what it’s currently trading. Furthermore, Sinopec Shanghai Petrochemical’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 Sinopec Shanghai Petrochemical 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. However, with a negative profit growth of -18.72% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Sinopec Shanghai Petrochemical. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Currently, Sinopec Shanghai Petrochemical appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on Sinopec Shanghai Petrochemical for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on Sinopec Shanghai Petrochemical should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Sinopec Shanghai Petrochemical. You can find everything you need to know about Sinopec Shanghai Petrochemical in the latest infographic research report. If you are no longer interested in Sinopec Shanghai Petrochemical, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.