Is It Time To Consider Buying CATARC Automotive Proving Ground Co.,Ltd. (SZSE:301215)?

CATARC Automotive Proving Ground Co.,Ltd. (SZSE:301215), is not the largest company out there, but it led the SZSE gainers with a relatively large price hike in the past couple of weeks. While good news for shareholders, the company has traded much higher in the past year. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine CATARC Automotive Proving GroundLtd’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for CATARC Automotive Proving GroundLtd

What Is CATARC Automotive Proving GroundLtd Worth?

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 54.33x is currently trading slightly above its industry peers’ ratio of 46.75x, which means if you buy CATARC Automotive Proving GroundLtd today, you’d be paying a relatively sensible price for it. And if you believe that CATARC Automotive Proving GroundLtd should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Although, there may be an opportunity to buy in the future. This is because CATARC Automotive Proving GroundLtd’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of CATARC Automotive Proving GroundLtd look like?

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. CATARC Automotive Proving GroundLtd'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? 301215’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 track record of its management team. Have these factors changed since the last time you looked at 301215? 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 301215, 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 301215, 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. You'd be interested to know, that we found 1 warning sign for CATARC Automotive Proving GroundLtd and you'll want to know about this.

If you are no longer interested in CATARC Automotive Proving GroundLtd, 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.