Why China Tian Lun Gas Holdings Limited (HKG:1600) Could Be Worth Watching
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China Tian Lun Gas Holdings Limited (HKG:1600), which is in the gas utilities 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 stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine China Tian Lun Gas Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for China Tian Lun Gas Holdings
What's the opportunity in China Tian Lun Gas Holdings?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that China Tian Lun Gas Holdings’s ratio of 13.28x is trading slightly below its industry peers’ ratio of 17.49x, which means if you buy China Tian Lun Gas Holdings today, you’d be paying a reasonable price for it. And if you believe that China Tian Lun Gas Holdings should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Furthermore, it seems like China Tian Lun Gas Holdings’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will China Tian Lun Gas Holdings 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. With profit expected to more than double over the next couple of years, the future seems bright for China Tian Lun Gas Holdings. 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? 1600’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at 1600? Will you have enough conviction to buy should the price fluctuate below the true value?
Are you a potential investor? If you’ve been keeping an eye on 1600, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for 1600, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on China Tian Lun Gas Holdings. You can find everything you need to know about China Tian Lun Gas Holdings in the latest infographic research report. If you are no longer interested in China Tian Lun Gas Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.
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. Thank you for reading.
