Should You Think About Buying Hangzhou Greatstar Industrial Co., Ltd (SZSE:002444) Now?

Hangzhou Greatstar Industrial Co., Ltd (SZSE:002444), might not be a large cap stock, but it led the SZSE gainers with a relatively large price hike in the past couple of weeks. The company is now trading at yearly-high levels following the recent surge in its share price. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today we will analyse the most recent data on Hangzhou Greatstar Industrial’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Hangzhou Greatstar Industrial

Is Hangzhou Greatstar Industrial Still Cheap?

Great news for investors – Hangzhou Greatstar Industrial is still trading at a fairly cheap price 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 17.56x is currently well-below the industry average of 22.58x, meaning that it is trading at a cheaper price relative to its peers. However, given that Hangzhou Greatstar Industrial’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 does the future of Hangzhou Greatstar Industrial look like?

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. Hangzhou Greatstar Industrial's earnings over the next few years are expected to increase by 35%, 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? Since 002444 is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic 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 capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on 002444 for a while, now might be the time to enter the stock. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 002444. 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.

If you want to dive deeper into Hangzhou Greatstar Industrial, you'd also look into what risks it is currently facing. Case in point: We've spotted 1 warning sign for Hangzhou Greatstar Industrial you should be aware of.

If you are no longer interested in Hangzhou Greatstar Industrial, 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.