Stock Valuation: GCL-Poly Energy Holdings Ltd (3800)

Name of Company Country of Origin/ Exchange Traded Sector Stock Price
GCL-POLY ENERGY HOLDINGS LTD Hong Kong/
HKSE
Utilities – Utilities – Regulated – Utilities – Regulated Electric HKD0.55
@ 29 Sep 2018
COMPANY PROFILE GCL-Poly Energy Holdings Ltd is engaged in manufacturing of polysilicon and wafers for the solar industry development, management and operation of environmental friendly power plants & trading of coal.

GCL-Poly Energy Holdings Ltd is a Chinese energy company involved in the supplying, manufacturing, and operation of photovoltaic equipment and solar farms. GCL-Poly segments its operations into Solar Material, Solar Farm, and New Energy businesses. Almost all of the company’s revenue comes from its Solar Material Business. This division encompasses the production and sale of wafer, a component used in solar cells, and polysilicon, a raw material used in the creation of solar wafer. Sales of wafer, specifically, make up the vast majority of the Solar Material unit’s revenue stream. GCL-Poly’s Solar Farm and New Energy businesses are, collectively, involved in the operation and construction of solar farms. The company’s revenue is primarily derived from customers located in China.

Stock Code 3800
Stock Valuation Below

GCL-Poly Energy Price to Sales

The Price to Sales Ratio is a commonly used valuation indicator for a stock. While not as popular as the Price to Earnings Ratio, it overcomes some of the limitations of the PE Ratio in that it can be used even when the company is not making a profit or only making minimal profits. However, it should not be used by itself because a company may be achieving sales but not profits.
At the price of HKD0.55 as at 29 Sep 2018, Gcl-Poly Energy Holdings Ltd is trading at a Price to Sales Ratio of 0.4 times last 12 months sales.  This is a 52.0% discount to current fair Price to Sales Ratio of 0.8 times.
Is the stock undervalued? One should not just look at one indicator to determine the fair value of a stock.
ProThinker believes in using a combination of valuation methods to decide whether a stock is over or undervalued? The five ratios we use are Price to Earnings, Price to Sales, Price to Cash Flow, Price to Book and Dividend Yield. We use multiple methods to value a stock because each has its benefits as well as shortcomings. Price to Earnings and Price to Cash Flow Ratios relate stock price to profitability but are meaningless when the comany has negative earnings or cash flows. Price to Sales Ratio is more stable because sales are never negative. However, this does not tell us whether the company is able to sell profitably. Price to Book Ratio gives us an indication as to how much we are paying for the company’s assets but it is not directly related to the company’s profitability. Dividend Yield cannot be used for companies that are paying little to no dividends.
While it is important to value stocks based on multiple valuation methods, this often leads to differing views on valuation. One indicator may suggest that a stock is overvalued while another suggest that it is undervalued. This does not help an investor who needs to make a definite decision whether to buy, hold or sell the stock. That is why we advocate the use of a Composite Valuation Indicator, which is derived from the best combination of the five indicators above. A Composite Valuation Indicator will give you ONE conclusion on whether a stock is under or over valued.
To find out more about our valuation methodology, click here. 
Source of Data: Company description, historical financial statements data and price data are from gurufocus.com or moneycontrol.com. Estimates are from marketscreener.com – Thomson Reuters.
Disclaimer: This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither ProThinker nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of ProThinker. Copyright(c) 2018. All rights reserved.

 

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