At CN¥25.80, Is It Time To Put Hangzhou Tianyuan Pet Products CO., LTD (SZSE:301335) On Your Watch List?

While Hangzhou Tianyuan Pet Products CO., LTD (SZSE:301335) 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. 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 Hangzhou Tianyuan Pet Products’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for Hangzhou Tianyuan Pet Products

What's The Opportunity In Hangzhou Tianyuan Pet Products?

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. 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 Hangzhou Tianyuan Pet Products’s ratio of 40.14x is trading slightly below its industry peers’ ratio of 43.15x, which means if you buy Hangzhou Tianyuan Pet Products today, you’d be paying a decent price for it. And if you believe Hangzhou Tianyuan Pet Products 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, Hangzhou Tianyuan Pet Products’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What does the future of Hangzhou Tianyuan Pet Products 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. With profit expected to grow by 67% over the next year, the near-term future seems bright for Hangzhou Tianyuan Pet 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? 301335’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 financial strength of the company. Have these factors changed since the last time you looked at 301335? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on 301335, 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 301335, which means it’s worth diving deeper into 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. In terms of investment risks, we've identified 2 warning signs with Hangzhou Tianyuan Pet Products, and understanding them should be part of your investment process.

If you are no longer interested in Hangzhou Tianyuan Pet 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.