At CN¥33.57, Is It Time To Put AECC Aviation Power Co.,Ltd (SHSE:600893) On Your Watch List?

Let's talk about the popular AECC Aviation Power Co.,Ltd (SHSE:600893). The company's shares saw a decent share price growth of 13% on the SHSE over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of 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, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on AECC Aviation PowerLtd’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for AECC Aviation PowerLtd

Is AECC Aviation PowerLtd 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 AECC Aviation PowerLtd’s ratio of 67.26x is trading slightly above its industry peers’ ratio of 57.64x, which means if you buy AECC Aviation PowerLtd today, you’d be paying a relatively sensible price for it. And if you believe AECC Aviation PowerLtd should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like AECC Aviation PowerLtd’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 AECC Aviation PowerLtd?

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. AECC Aviation PowerLtd's earnings over the next few years are expected to increase by 58%, 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? 600893’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 600893? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on 600893, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 600893, which means it’s worth diving deeper into 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 AECC Aviation PowerLtd at this point in time. Every company has risks, and we've spotted 1 warning sign for AECC Aviation PowerLtd you should know about.

If you are no longer interested in AECC Aviation PowerLtd, 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.