When Should You Buy Luoyang Glass Company Limited (HKG:1108)?

By
Simply Wall St
Published
January 25, 2022
SEHK:1108
Source: Shutterstock

Luoyang Glass Company Limited (HKG:1108), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the SEHK. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Luoyang Glass’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Luoyang Glass

What's the opportunity in Luoyang Glass?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Luoyang Glass’s ratio of 13.48x is trading slightly above its industry peers’ ratio of 8.58x, which means if you buy Luoyang Glass today, you’d be paying a relatively sensible price for it. And if you believe Luoyang Glass should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Although, there may be an opportunity to buy in the future. This is because Luoyang Glass’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.

Can we expect growth from Luoyang Glass?

earnings-and-revenue-growth
SEHK:1108 Earnings and Revenue Growth January 25th 2022

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. Luoyang Glass' earnings over the next few years are expected to increase by 34%, 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 already priced in 1108’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at 1108? 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 tabs on 1108, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 1108, which means it’s worth further examining 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, we've found that Luoyang Glass has 3 warning signs (1 can't be ignored!) that deserve your attention before going any further with your analysis.

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

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