Is China Sunsine Chemical Holdings Ltd. (SGX:QES) Potentially Undervalued?
China Sunsine Chemical Holdings Ltd. (SGX:QES), is not the largest company out there, but it saw significant share price movement during recent months on the SGX, rising to highs of S$0.48 and falling to the lows of S$0.42. 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 Sunsine Chemical Holdings' current trading price of S$0.42 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at China Sunsine Chemical Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Check out our latest analysis for China Sunsine Chemical Holdings
What's The Opportunity In China Sunsine Chemical Holdings?
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 3.32x is currently trading slightly below its industry peers’ ratio of 5.24x, which means if you buy China Sunsine Chemical Holdings today, you’d be paying a reasonable price for it. And if you believe China Sunsine Chemical Holdings 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, China Sunsine Chemical Holdings’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 China Sunsine Chemical Holdings generate?
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. However, with a negative profit growth of -19% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for China Sunsine Chemical Holdings. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Currently, QES appears to be trading around industry price multiples, 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 beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on QES, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on QES for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, 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 gel your views on QES should the price fluctuate below the industry PE ratio.
If you want to dive deeper into China Sunsine Chemical Holdings, you'd also look into what risks it is currently facing. Our analysis shows 3 warning signs for China Sunsine Chemical Holdings (2 make us uncomfortable!) and we strongly recommend you look at them before investing.
If you are no longer interested in China Sunsine Chemical Holdings, 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.
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