Is Now The Time To Look At Buying Yuneng Technology Co., Ltd. (SHSE:688348)?

Yuneng Technology Co., Ltd. (SHSE:688348), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the SHSE over the last few months. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. 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. However, what if the stock is still a bargain? Today we will analyse the most recent data on Yuneng Technology’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Yuneng Technology

Is Yuneng Technology Still Cheap?

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 Yuneng Technology’s ratio of 44.82x is above its peer average of 35.66x, which suggests the stock is trading at a higher price compared to the Electrical industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Yuneng Technology’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Yuneng Technology generate?

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 more than double over the next couple of years, the future seems bright for Yuneng Technology. 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? 688348’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe 688348 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 tabs on 688348 for some time, 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 optimistic prospect is encouraging for 688348, 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 Yuneng Technology as a business, it's important to be aware of any risks it's facing. For example, we've found that Yuneng Technology has 2 warning signs (1 can't be ignored!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Yuneng Technology, 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.