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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?