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Is Now The Time To Look At Buying Nine Dragons Paper (Holdings) Limited (HKG:2689)?

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Simply Wall St
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Nine Dragons Paper (Holdings) Limited (HKG:2689), which is in the forestry business, and is based in China, saw a significant share price rise of over 20% in the past couple of months on the SEHK. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Nine Dragons Paper (Holdings)’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Nine Dragons Paper (Holdings)

What's the opportunity in Nine Dragons Paper (Holdings)?

Great news for investors – Nine Dragons Paper (Holdings) is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is HK$13.69, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Nine Dragons Paper (Holdings)’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.

What kind of growth will Nine Dragons Paper (Holdings) generate?

SEHK:2689 Past and Future Earnings, January 2nd 2020
SEHK:2689 Past and Future Earnings, January 2nd 2020

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. 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 relatively muted profit growth of 4.9% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Nine Dragons Paper (Holdings), at least in the short term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since 2689 is currently undervalued, it may be a great time to increase your holdings in the stock. 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 2689 for a while, now might be the time to enter the stock. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 2689. 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 buy.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.