Should You Investigate Dongguan Tarry Electronics Co.,Ltd (SZSE:300976) At CN¥42.92?

Dongguan Tarry Electronics Co.,Ltd (SZSE:300976), is not the largest company out there, but it led the SZSE gainers with a relatively large price hike in the past couple of weeks. 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 tend to present 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 take a look at Dongguan Tarry ElectronicsLtd’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Dongguan Tarry ElectronicsLtd

What Is Dongguan Tarry ElectronicsLtd Worth?

The share price seems sensible at the moment 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 39.74x is currently trading slightly above its industry peers’ ratio of 39.3x, which means if you buy Dongguan Tarry ElectronicsLtd today, you’d be paying a relatively reasonable price for it. And if you believe that Dongguan Tarry ElectronicsLtd should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Although, there may be an opportunity to buy in the future. This is because Dongguan Tarry ElectronicsLtd’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Dongguan Tarry ElectronicsLtd look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to more than double over the next couple of years, the future seems bright for Dongguan Tarry ElectronicsLtd. 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? 300976’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at 300976? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on 300976, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 300976, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, 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. For example - Dongguan Tarry ElectronicsLtd has 1 warning sign we think you should be aware of.

If you are no longer interested in Dongguan Tarry ElectronicsLtd, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com