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Should China Petroleum & Chemical Corporation (HKG:386) Be Your Next Stock Pick?

I’ve been keeping an eye on China Petroleum & Chemical Corporation (HKG:386) because I’m attracted to its fundamentals. Looking at the company as a whole, as a potential stock investment, I believe 386 has a lot to offer. Basically, it is a financially-sound company with a an impressive track record high-quality dividend payments, trading at a great value. Below, I’ve touched on some key aspects you should know on a high level. For those interested in digger a bit deeper into my commentary, take a look at the report on China Petroleum & Chemical here.

Undervalued with excellent balance sheet and pays a dividend

With a debt-to-equity ratio of 23%, 386’s debt level is acceptable. This indicates a good balance between taking advantage of low cost funding through debt financing, but having enough financial flexibility and headroom to grow debt in the future. 386 appears to have made good use of debt, producing operating cash levels of 1.1x total debt in the prior year. This is a strong indication that debt is reasonably met with cash generated. 386’s share price is trading at below its true value, meaning that the market sentiment for the stock is currently bearish. According to my intrinsic value of the stock, which is driven by analyst consensus forecast of 386’s earnings, investors now have the opportunity to buy into the stock to reap capital gains. Compared to the rest of the oil and gas industry, 386 is also trading below its peers, relative to earnings generated. This supports the theory that 386 is potentially underpriced.

SEHK:386 Intrinsic Value Export November 2nd 18
SEHK:386 Intrinsic Value Export November 2nd 18

For those seeking income streams from their portfolio, 386 is a robust dividend payer as well. Over the past decade, the company has consistently increased its dividend payout, reaching a yield of 8.8%, making it one of the best dividend companies in the market.

SEHK:386 Historical Dividend Yield November 2nd 18
SEHK:386 Historical Dividend Yield November 2nd 18

Next Steps:

For China Petroleum & Chemical, I’ve compiled three essential factors you should look at:

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  1. Future Outlook: What are well-informed industry analysts predicting for 386’s future growth? Take a look at our free research report of analyst consensus for 386’s outlook.

  2. Historical Performance: What has 386’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

  3. Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of 386? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.