China Everbright Water Limited (SGX:U9E), which is in the water utilities business, and is based in China, saw significant share price movement during recent months on the SGX, rising to highs of S$0.37 and falling to the lows of S$0.30. 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 Everbright Water's current trading price of S$0.32 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 Everbright Water’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is China Everbright Water still cheap?
Good news, investors! China Everbright Water is still a bargain right now. 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 6.64x is currently well-below the industry average of 16.43x, meaning that it is trading at a cheaper price relative to its peers. However, given that China Everbright Water’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from China Everbright Water?
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. With profit expected to grow by 33% over the next couple of years, the future seems bright for China Everbright Water. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? Since U9E is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on U9E for a while, now might be the time to make a leap. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy U9E. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on China Everbright Water. You can find everything you need to know about China Everbright Water in the latest infographic research report. If you are no longer interested in China Everbright Water, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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