At CN¥11.39, Is It Time To Put Sichuan New Energy Power Company Limited (SZSE:000155) On Your Watch List?

Sichuan New Energy Power Company Limited (SZSE:000155), is not the largest company out there, but it saw a significant share price rise of 28% in the past couple of months on the SZSE. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. As a CN¥21b market-cap stock, it seems odd Sichuan New Energy Power is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Let’s examine Sichuan New Energy Power’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Sichuan New Energy Power

What's The Opportunity In Sichuan New Energy Power?

Sichuan New Energy Power 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 Sichuan New Energy Power’s ratio of 24.36x is above its peer average of 17.92x, which suggests the stock is trading at a higher price compared to the Renewable Energy industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since Sichuan New Energy Power’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Sichuan New Energy Power?

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. Sichuan New Energy Power's earnings over the next few years are expected to increase by 65%, 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? It seems like the market has well and truly priced in 000155’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 000155 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 000155 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 optimistic prospect is encouraging for 000155, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Sichuan New Energy Power at this point in time. You'd be interested to know, that we found 2 warning signs for Sichuan New Energy Power and you'll want to know about these.

If you are no longer interested in Sichuan New Energy Power, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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

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.