When Should You Buy Wenzhou Yuanfei pet toy products Co., Ltd. (SZSE:001222)?

While Wenzhou Yuanfei pet toy products Co., Ltd. (SZSE:001222) might not have the largest market cap around , it received a lot of attention from a substantial price increase on the SZSE over the last few months. The company's trading levels have reached its high for the past year, following the recent bounce in the share price. 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 examine Wenzhou Yuanfei pet toy products’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Wenzhou Yuanfei pet toy products

What's The Opportunity In Wenzhou Yuanfei pet toy products?

Good news, investors! Wenzhou Yuanfei pet toy products is still a bargain right now according to our price multiple model, which compares 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 Wenzhou Yuanfei pet toy products’s ratio of 20.99x is below its peer average of 30.22x, which indicates the stock is trading at a lower price compared to the Leisure industry. What’s more interesting is that, Wenzhou Yuanfei pet toy products’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 Wenzhou Yuanfei pet toy products look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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 grow by 45% over the next couple of years, the future seems bright for Wenzhou Yuanfei pet toy products. 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? Since 001222 is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on 001222 for a while, now might be the time to make a leap. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 001222. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, Wenzhou Yuanfei pet toy products has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

If you are no longer interested in Wenzhou Yuanfei pet toy products, 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.