Is It Too Late To Consider Buying SINOPEC Engineering (Group) Co., Ltd. (HKG:2386)?

SINOPEC Engineering (Group) Co., Ltd. (HKG:2386), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the SEHK over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? 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)

What Is SINOPEC Engineering (Group) Worth?

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. I’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 6.45x is currently trading slightly below its industry peers’ ratio of 9.33x, which means if you buy SINOPEC Engineering (Group) today, you’d be paying a decent price for it. And if you believe that SINOPEC Engineering (Group) should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, it seems like SINOPEC Engineering (Group)’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of SINOPEC Engineering (Group) 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. SINOPEC Engineering (Group)'s 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 2386’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 2386? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on 2386, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 2386, 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.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. In terms of investment risks, we've identified 1 warning sign with SINOPEC Engineering (Group), and understanding it should be part of your investment process.

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.