At CN¥4.99, Is It Time To Put Lanzhou LS Heavy Equipment Co., Ltd (SHSE:603169) On Your Watch List?

Lanzhou LS Heavy Equipment Co., Ltd (SHSE:603169), is not the largest company out there, but it saw a significant share price rise of 23% in the past couple of months on the SHSE. 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 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 take a look at Lanzhou LS Heavy Equipment’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Lanzhou LS Heavy Equipment

What Is Lanzhou LS Heavy Equipment Worth?

According to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 Lanzhou LS Heavy Equipment’s ratio of 42.4x is above its peer average of 29.66x, which suggests the stock is trading at a higher price compared to the Machinery industry. In addition to this, it seems like Lanzhou LS Heavy Equipment’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Lanzhou LS Heavy Equipment look like?

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. 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. Lanzhou LS Heavy Equipment's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in 603169’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 603169 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 an eye on 603169 for a while, 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 positive outlook is encouraging for 603169, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Lanzhou LS Heavy Equipment as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 1 warning sign for Lanzhou LS Heavy Equipment you should be aware of.

If you are no longer interested in Lanzhou LS Heavy Equipment, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.