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), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the SZSE over the last few months. 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? Let’s examine Zhejiang Asia-Pacific Mechanical & ElectronicLtd’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Zhejiang Asia-Pacific Mechanical & ElectronicLtd

Is Zhejiang Asia-Pacific Mechanical & ElectronicLtd Still Cheap?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio 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 42.35x is currently trading slightly above its industry peers’ ratio of 37.24x, which means if you buy Zhejiang Asia-Pacific Mechanical & ElectronicLtd today, you’d be paying a relatively sensible price for it. And if you believe that Zhejiang Asia-Pacific Mechanical & ElectronicLtd should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry 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. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What kind of growth will Zhejiang Asia-Pacific Mechanical & ElectronicLtd 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 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 already priced in 002284’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at 002284? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on 002284, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 002284, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. While conducting our analysis, we found that Zhejiang Asia-Pacific Mechanical & ElectronicLtd has 1 warning sign and it would be unwise to ignore this.

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.