Why Anhui Yingliu Electromechanical Co., Ltd. (SHSE:603308) Could Be Worth Watching

Anhui Yingliu Electromechanical Co., Ltd. (SHSE:603308), might not be a large cap stock, but it saw a significant share price rise of 46% 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. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine Anhui Yingliu Electromechanical’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

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What's The Opportunity In Anhui Yingliu Electromechanical?

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 Anhui Yingliu Electromechanical’s ratio of 45.13x is trading slightly above its industry peers’ ratio of 41.75x, which means if you buy Anhui Yingliu Electromechanical today, you’d be paying a relatively reasonable price for it. And if you believe Anhui Yingliu Electromechanical 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, Anhui Yingliu Electromechanical’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.

Check out our latest analysis for Anhui Yingliu Electromechanical

Can we expect growth from Anhui Yingliu Electromechanical?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 97% over the next couple of years, the future seems bright for Anhui Yingliu Electromechanical. 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? 603308’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 603308? 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 603308, 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 603308, 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Be aware that Anhui Yingliu Electromechanical is showing 4 warning signs in our investment analysis and 1 of those is potentially serious...

If you are no longer interested in Anhui Yingliu Electromechanical, 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.