Is Now The Time To Look At Buying Nanjing Xinjiekou Department Store Co., Ltd. (SHSE:600682)?

While Nanjing Xinjiekou Department Store Co., Ltd. (SHSE:600682) might not have the largest market cap around , 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 small cap stock, hardly covered by any analysts, 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 Nanjing Xinjiekou Department Store’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Nanjing Xinjiekou Department Store

Is Nanjing Xinjiekou Department Store 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 29.58x is currently trading slightly below its industry peers’ ratio of 34.58x, which means if you buy Nanjing Xinjiekou Department Store today, you’d be paying a decent price for it. And if you believe Nanjing Xinjiekou Department Store 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 Nanjing Xinjiekou Department Store’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.

What kind of growth will Nanjing Xinjiekou Department Store 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. Nanjing Xinjiekou Department Store'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? 600682’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 600682? 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 600682, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 600682, 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. While conducting our analysis, we found that Nanjing Xinjiekou Department Store has 1 warning sign and it would be unwise to ignore it.

If you are no longer interested in Nanjing Xinjiekou Department Store, 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.