What Is Ningbo Runhe High-Tech Materials Co., Ltd.'s (SZSE:300727) Share Price Doing?

Ningbo Runhe High-Tech Materials Co., Ltd. (SZSE:300727), is not the largest company out there, but it saw a double-digit share price rise of over 10% in the past couple of months on the SZSE. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. Less-covered, small caps sees 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? Today we will analyse the most recent data on Ningbo Runhe High-Tech Materials’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Ningbo Runhe High-Tech Materials

What's The Opportunity In Ningbo Runhe High-Tech Materials?

According to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 42.16x is currently well-above the industry average of 33.77x, meaning that it is trading at a more expensive price relative to its peers. Another thing to keep in mind is that Ningbo Runhe High-Tech Materials’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.

What does the future of Ningbo Runhe High-Tech Materials 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 revenues expected to grow by 38% over the next couple of years, the future seems bright for Ningbo Runhe High-Tech Materials. If the level of expenses is able to be maintained, 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? 300727’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe 300727 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on 300727 for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for 300727, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Ningbo Runhe High-Tech Materials as a business, it's important to be aware of any risks it's facing. At Simply Wall St, we found 1 warning sign for Ningbo Runhe High-Tech Materials and we think they deserve your attention.

If you are no longer interested in Ningbo Runhe High-Tech Materials, 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.