Should You Investigate Shenzhen Aisidi Co., Ltd. (SZSE:002416) At CN¥14.99?

Shenzhen Aisidi Co., Ltd. (SZSE:002416), might not be a large cap stock, but 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 CN¥19b market-cap stock, it seems odd Shenzhen Aisidi is not more well-covered by analysts. Although, there is more of an opportunity for mispricing in stocks with low coverage, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at Shenzhen Aisidi’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Shenzhen Aisidi

What's The Opportunity In Shenzhen Aisidi?

Great news for investors – Shenzhen Aisidi is still trading at a fairly cheap price 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 28x is currently well-below the industry average of 47.75x, meaning that it is trading at a cheaper price relative to its peers. However, given that Shenzhen Aisidi’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Shenzhen Aisidi?

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. Shenzhen Aisidi's earnings over the next few years are expected to increase by 47%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? Since 002416 is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on 002416 for a while, now might be the time to enter the stock. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 002416. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

So while earnings quality is important, it's equally important to consider the risks facing Shenzhen Aisidi at this point in time. You'd be interested to know, that we found 3 warning signs for Shenzhen Aisidi and you'll want to know about them.

If you are no longer interested in Shenzhen Aisidi, 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.