Should You Investigate Yantai Eddie Precision Machinery Co., Ltd. (SHSE:603638) At CN¥16.41?

Yantai Eddie Precision Machinery Co., Ltd. (SHSE:603638), is not the largest company out there, but it saw a decent share price growth of 18% 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 stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today we will analyse the most recent data on Yantai Eddie Precision Machinery’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Yantai Eddie Precision Machinery

What's The Opportunity In Yantai Eddie Precision Machinery?

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 Yantai Eddie Precision Machinery’s ratio of 39.38x is trading slightly above its industry peers’ ratio of 34.65x, which means if you buy Yantai Eddie Precision Machinery today, you’d be paying a relatively reasonable price for it. And if you believe Yantai Eddie Precision Machinery 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. 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.

Can we expect growth from Yantai Eddie Precision Machinery?

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. Yantai Eddie Precision Machinery's earnings over the next few years are expected to increase by 27%, 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? It seems like the market has already priced in 603638’s positive outlook, 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 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 tabs 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 diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Yantai Eddie Precision Machinery as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Yantai Eddie Precision Machinery has 1 warning sign and it would be unwise to ignore this.

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.