Is It Time To Consider Buying Beijing Zhidemai Technology Co., Ltd. (SZSE:300785)?

While Beijing Zhidemai Technology Co., Ltd. (SZSE:300785) 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 recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. 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 Beijing Zhidemai Technology’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Beijing Zhidemai Technology

What's The Opportunity In Beijing Zhidemai Technology?

Beijing Zhidemai Technology appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 49.46x is currently well-above the industry average of 33.88x, meaning that it is trading at a more expensive price relative to its peers. In addition to this, it seems like Beijing Zhidemai Technology’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Beijing Zhidemai Technology generate?

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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Beijing Zhidemai Technology'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? It seems like the market has well and truly priced in 300785’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe 300785 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 tabs on 300785 for some time, 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 300785, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Our analysis shows 4 warning signs for Beijing Zhidemai Technology (1 is significant!) and we strongly recommend you look at them before investing.

If you are no longer interested in Beijing Zhidemai Technology, 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.