What Is Chongqing Zongshen Power Machinery Co.,Ltd's (SZSE:001696) Share Price Doing?

While Chongqing Zongshen Power Machinery Co.,Ltd (SZSE:001696) might not have the largest market cap around , it led the SZSE gainers with a relatively large price hike in the past couple of weeks. The recent jump in the share price has meant that the company is trading at close to its 52-week high. As a CN¥16b market-cap stock, it seems odd Chongqing Zongshen Power MachineryLtd is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Let’s take a look at Chongqing Zongshen Power MachineryLtd’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Chongqing Zongshen Power MachineryLtd

What Is Chongqing Zongshen Power MachineryLtd Worth?

Chongqing Zongshen Power MachineryLtd is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 42.23x is currently well-above the industry average of 28.25x, meaning that it is trading at a more expensive price relative to its peers. In addition to this, it seems like Chongqing Zongshen Power MachineryLtd’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Chongqing Zongshen Power MachineryLtd generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Chongqing Zongshen Power MachineryLtd's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in 001696’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe 001696 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on 001696 for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for 001696, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Chongqing Zongshen Power MachineryLtd, you'd also look into what risks it is currently facing. When we did our research, we found 2 warning signs for Chongqing Zongshen Power MachineryLtd (1 doesn't sit too well with us!) that we believe deserve your full attention.

If you are no longer interested in Chongqing Zongshen Power MachineryLtd, 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.