At CN¥20.84, Is Yantai Eddie Precision Machinery Co., Ltd. (SHSE:603638) Worth Looking At Closely?

While Yantai Eddie Precision Machinery Co., Ltd. (SHSE:603638) might not have the largest market cap around , it received a lot of attention from a substantial price increase on the SHSE over the last few months. The company is inching closer to its yearly highs following the recent share price climb. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s examine Yantai Eddie Precision Machinery’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Yantai Eddie Precision Machinery

What's The Opportunity In Yantai Eddie Precision Machinery?

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. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 50.01x is currently trading slightly above its industry peers’ ratio of 41.83x, which means if you buy Yantai Eddie Precision Machinery today, you’d be paying a relatively sensible price for it. And if you believe that Yantai Eddie Precision Machinery should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Is there another opportunity to buy low in the future? Since Yantai Eddie Precision Machinery’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Yantai Eddie Precision Machinery look like?

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. Yantai Eddie Precision Machinery's earnings over the next few years are expected to increase by 37%, 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? 603638’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 603638? 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 603638, 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 603638, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. At Simply Wall St, we found 1 warning sign for Yantai Eddie Precision Machinery and we think they deserve your attention.

If you are no longer interested in Yantai Eddie Precision Machinery, 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.