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Churchill China plc (LON:CHH), is not the largest company out there, but it saw significant share price movement during recent months on the AIM, rising to highs of UK£7.50 and falling to the lows of UK£4.85. 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 Churchill China's current trading price of UK£5.10 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 Churchill China’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What Is Churchill China Worth?
Good news, investors! Churchill China is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. we find that Churchill China’s ratio of 7.17x is below its peer average of 11.77x, which indicates the stock is trading at a lower price compared to the Consumer Durables industry. What’s more interesting is that, Churchill China’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to move closer to its industry peers, 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.
Check out our latest analysis for Churchill China
What kind of growth will Churchill China generate?
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 a negative profit growth of -15% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Churchill China. This certainty tips the risk-return scale towards higher risk.
What This Means For You
Are you a shareholder? Although CHH is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to CHH, or whether diversifying into another stock may be a better move for your total risk and return.