Is There Now An Opportunity In Shandong Linglong Tyre Co.,Ltd. (SHSE:601966)?

Shandong Linglong Tyre Co.,Ltd. (SHSE:601966), is not the largest company out there, but it led the SHSE gainers with a relatively large price hike in the past couple of weeks. While good news for shareholders, the company has traded much higher in the past year. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today we will analyse the most recent data on Shandong Linglong TyreLtd’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Shandong Linglong TyreLtd

What's The Opportunity In Shandong Linglong TyreLtd?

Good news, investors! Shandong Linglong TyreLtd 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 Shandong Linglong TyreLtd’s ratio of 16.79x is below its peer average of 29.24x, which indicates the stock is trading at a lower price compared to the Auto Components industry. Another thing to keep in mind is that Shandong Linglong TyreLtd’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What kind of growth will Shandong Linglong TyreLtd generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 66% over the next couple of years, the future seems bright for Shandong Linglong TyreLtd. 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? Since 601966 is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on 601966 for a while, now might be the time to make a leap. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 601966. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.

So while earnings quality is important, it's equally important to consider the risks facing Shandong Linglong TyreLtd at this point in time. To help with this, we've discovered 2 warning signs (1 doesn't sit too well with us!) that you ought to be aware of before buying any shares in Shandong Linglong TyreLtd.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.