Why Shenzhen Sunnypol Optoelectronics Co.,Ltd. (SZSE:002876) Could Be Worth Watching

Shenzhen Sunnypol Optoelectronics Co.,Ltd. (SZSE:002876), might not be a large cap stock, but it saw a decent share price growth of 16% 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, hardly covered by any analysts, 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 take a look at Shenzhen Sunnypol OptoelectronicsLtd’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Shenzhen Sunnypol OptoelectronicsLtd

Is Shenzhen Sunnypol OptoelectronicsLtd Still Cheap?

Shenzhen Sunnypol OptoelectronicsLtd 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. 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 Sunnypol OptoelectronicsLtd’s ratio of 49.39x is above its peer average of 38.84x, which suggests the stock is trading at a higher price compared to the Electronic industry. Furthermore, Shenzhen Sunnypol OptoelectronicsLtd’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What kind of growth will Shenzhen Sunnypol OptoelectronicsLtd 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. 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 Sunnypol OptoelectronicsLtd. 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 002876’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 002876 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 002876 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 002876, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 3 warning signs for Shenzhen Sunnypol OptoelectronicsLtd you should be aware of.

If you are no longer interested in Shenzhen Sunnypol OptoelectronicsLtd, 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.