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Metallurgical Corporation of China Ltd. (HKG:1618), which is in the construction business, and is based in China, received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$2.36 at one point, and dropping to the lows of HK$1.94. 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 Metallurgical of China's current trading price of HK$2.03 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 Metallurgical of China’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Metallurgical of China

Is Metallurgical of China still cheap?

The stock seems fairly valued at the moment according to my relative valuation model. 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 6.56x is currently trading slightly below its industry peers’ ratio of 9.77x, which means if you buy Metallurgical of China today, you’d be paying a reasonable price for it. And if you believe Metallurgical of China should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. In addition to this, it seems like Metallurgical of China’s share price is quite stable, which could mean 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 Metallurgical of China 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. Metallurgical of China’s earnings over the next few years are expected to increase by 56%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? 1618’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 track record of its management team. Have these factors changed since the last time you looked at 1618? 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 tabs on 1618, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for 1618, 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 Metallurgical of China. You can find everything you need to know about Metallurgical of China in the latest infographic research report. If you are no longer interested in Metallurgical of China, 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.