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Should You Investigate Churchill China plc (LON:CHH) At UK£10.10?

Churchill China plc (LON:CHH), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the AIM over the last few months, increasing to UK£11.40 at one point, and dropping to the lows of UK£9.60. 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£10.10 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.

View our latest analysis for Churchill China

What is Churchill China worth?

According to my valuation model, Churchill China seems to be fairly priced at around 8.36% above my intrinsic value, which means if you buy Churchill China today, you’d be paying a relatively fair price for it. And if you believe the company’s true value is £9.32, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since Churchill China’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Churchill China generate?

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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. Churchill China's earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in CHH’s positive outlook, 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on CHH, 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 the company, 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.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. While conducting our analysis, we found that Churchill China has 1 warning sign and it would be unwise to ignore this.

If you are no longer interested in Churchill China, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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