At HK$3.99, Is It Time To Put SINOPEC Engineering (Group) Co., Ltd. (HKG:2386) On Your Watch List?

SINOPEC Engineering (Group) Co., Ltd. (HKG:2386), might not be a large cap stock, but it saw a decent share price growth in the teens level on the SEHK over the last few months. 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. However, what if the stock is still a bargain? Let’s take a look at SINOPEC Engineering (Group)’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for SINOPEC Engineering (Group)

Is SINOPEC Engineering (Group) still cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 SINOPEC Engineering (Group)’s ratio of 5.84x is trading slightly below its industry peers’ ratio of 8.81x, which means if you buy SINOPEC Engineering (Group) today, you’d be paying a decent price for it. And if you believe SINOPEC Engineering (Group) should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since SINOPEC Engineering (Group)’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 SINOPEC Engineering (Group)?

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. However, with a relatively muted profit growth of 8.1% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for SINOPEC Engineering (Group), at least in the short term.

What this means for you:

Are you a shareholder? It seems like the market has already priced in 2386’s growth outlook, 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 2386? 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 2386, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean 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 1 warning sign for SINOPEC Engineering (Group) you should be aware of.

If you are no longer interested in SINOPEC Engineering (Group), 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.