Is Now The Time To Look At Buying GRG Metrology & Test Group Co., Ltd. (SZSE:002967)?

GRG Metrology & Test Group Co., Ltd. (SZSE:002967), might not be a large cap stock, but it saw a decent share price growth of 18% on the SZSE 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 small cap stock, which tends to lack high analyst coverage, 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 GRG Metrology & Test Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for GRG Metrology & Test Group

Is GRG Metrology & Test Group Still Cheap?

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. 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 38.5x is currently trading slightly below its industry peers’ ratio of 39.62x, which means if you buy GRG Metrology & Test Group today, you’d be paying a reasonable price for it. And if you believe GRG Metrology & Test Group should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like GRG Metrology & Test Group’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from GRG Metrology & Test Group?

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. GRG Metrology & Test Group'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 already priced in 002967’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 002967? 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 002967, 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 002967, 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.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Case in point: We've spotted 2 warning signs for GRG Metrology & Test Group you should be aware of.

If you are no longer interested in GRG Metrology & Test Group, 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.