Is Now The Time To Look At Buying NINGBO HENGSHUAI Co., LTD. (SZSE:300969)?

NINGBO HENGSHUAI Co., LTD. (SZSE:300969), is not the largest company out there, but it received a lot of attention from a substantial price increase on the SZSE over the last few months. The company's trading levels have reached its high for the past year, following the recent bounce in the share price. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today we will analyse the most recent data on NINGBO HENGSHUAI’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for NINGBO HENGSHUAI

Is NINGBO HENGSHUAI 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. 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 NINGBO HENGSHUAI’s ratio of 36.87x is trading slightly above its industry peers’ ratio of 32.71x, which means if you buy NINGBO HENGSHUAI today, you’d be paying a relatively sensible price for it. And if you believe that NINGBO HENGSHUAI should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. In addition to this, it seems like NINGBO HENGSHUAI’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from NINGBO HENGSHUAI?

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. NINGBO HENGSHUAI's earnings over the next few years are expected to increase by 61%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? 300969’s optimistic future growth appears to have been factored into the current share price, 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 300969? 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 an eye on 300969, 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 300969, 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.

Since timing is quite important when it comes to individual stock picking, it's worth taking a look at what those latest analysts forecasts are. So feel free to check out our free graph representing analyst forecasts.

If you are no longer interested in NINGBO HENGSHUAI, 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.