Is It Too Late To Consider Buying Shenzhen JPT Opto-Electronics Co., Ltd. (SHSE:688025)?

Shenzhen JPT Opto-Electronics Co., Ltd. (SHSE:688025), might not be a large cap stock, but it led the SHSE gainers with a relatively large price hike in the past couple of weeks. While good news for shareholders, the company has traded much higher in the past year. 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? Let’s examine Shenzhen JPT Opto-Electronics’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Shenzhen JPT Opto-Electronics

What's The Opportunity In Shenzhen JPT Opto-Electronics?

Shenzhen JPT Opto-Electronics is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison 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 Shenzhen JPT Opto-Electronics’s ratio of 49.65x is above its peer average of 40.54x, which suggests the stock is trading at a higher price compared to the Electronic industry. Another thing to keep in mind is that Shenzhen JPT Opto-Electronics’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 kind of growth will Shenzhen JPT Opto-Electronics 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. With profit expected to more than double over the next couple of years, the future seems bright for Shenzhen JPT Opto-Electronics. 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? It seems like the market has well and truly priced in 688025’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe 688025 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 688025 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 688025, 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 Shenzhen JPT Opto-Electronics as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Shenzhen JPT Opto-Electronics has 1 warning sign and it would be unwise to ignore this.

If you are no longer interested in Shenzhen JPT Opto-Electronics, 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.