Is It Too Late To Consider Buying Sany Heavy Industry Co.,Ltd (SHSE:600031)?

Sany Heavy Industry Co.,Ltd (SHSE:600031) saw a significant share price rise of 23% in the past couple of months on the SHSE. The recent share price gains has brought the company back closer to its yearly peak. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today we will analyse the most recent data on Sany Heavy IndustryLtd’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Sany Heavy IndustryLtd

What Is Sany Heavy IndustryLtd Worth?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Sany Heavy IndustryLtd’s ratio of 31.16x is trading slightly above its industry peers’ ratio of 30.9x, which means if you buy Sany Heavy IndustryLtd today, you’d be paying a relatively reasonable price for it. And if you believe that Sany Heavy IndustryLtd should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, it seems like Sany Heavy IndustryLtd’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Sany Heavy IndustryLtd?

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. Sany Heavy IndustryLtd's earnings over the next few years are expected to increase by 71%, 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? 600031’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 track record of its management team. Have these factors changed since the last time you looked at 600031? 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 600031, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 600031, 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.

So while earnings quality is important, it's equally important to consider the risks facing Sany Heavy IndustryLtd at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Sany Heavy IndustryLtd.

If you are no longer interested in Sany Heavy IndustryLtd, 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.