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Is Now An Opportune Moment To Examine Nine Dragons Paper (Holdings) Limited (HKG:2689)?

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Becky Mayes
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Nine Dragons Paper (Holdings) Limited (HKG:2689), which is in the forestry business, and is based in Hong Kong, received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$8.52 at one point, and dropping to the lows of HK$6.82. 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 Nine Dragons Paper (Holdings)’s current trading price of HK$7.01 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 Nine Dragons Paper (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 Nine Dragons Paper (Holdings)

What is Nine Dragons Paper (Holdings) worth?

Great news for investors – Nine Dragons Paper (Holdings) is still trading at a fairly cheap price. 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 3.66x is currently well-below the industry average of 11.26x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Nine Dragons Paper (Holdings)’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move to its intrinsic value, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Nine Dragons Paper (Holdings)?

SEHK:2689 Future Profit January 8th 19
SEHK:2689 Future Profit January 8th 19

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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Nine Dragons Paper (Holdings), at least in the near future.

What this means for you:

Are you a shareholder? Although 2689 is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to 2689, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on 2689 for a while, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Nine Dragons Paper (Holdings). You can find everything you need to know about Nine Dragons Paper (Holdings) in the latest infographic research report. If you are no longer interested in Nine Dragons Paper (Holdings), you can use our free platform to see my list of over 50 other stocks with a high growth potential.

To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.