Is Now The Time To Look At Buying Zhejiang Asia-Pacific Mechanical & Electronic Co.,Ltd (SZSE:002284)?

Zhejiang Asia-Pacific Mechanical & Electronic Co.,Ltd (SZSE:002284), is not the largest company out there, but it saw a significant share price rise of 32% in the past couple of months on the SZSE. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today we will analyse the most recent data on Zhejiang Asia-Pacific Mechanical & ElectronicLtd’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Zhejiang Asia-Pacific Mechanical & ElectronicLtd

What's The Opportunity In Zhejiang Asia-Pacific Mechanical & ElectronicLtd?

Zhejiang Asia-Pacific Mechanical & ElectronicLtd 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 40.22x is currently well-above the industry average of 31.71x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, Zhejiang Asia-Pacific Mechanical & ElectronicLtd’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What does the future of Zhejiang Asia-Pacific Mechanical & ElectronicLtd look like?

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. With profit expected to grow by 75% over the next couple of years, the future seems bright for Zhejiang Asia-Pacific Mechanical & ElectronicLtd. 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? It seems like the market has well and truly priced in 002284’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 002284 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 tabs on 002284 for some time, 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 002284, 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 Zhejiang Asia-Pacific Mechanical & ElectronicLtd, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for Zhejiang Asia-Pacific Mechanical & ElectronicLtd and we think they deserve your attention.

If you are no longer interested in Zhejiang Asia-Pacific Mechanical & ElectronicLtd, 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.