Why CSSC Offshore & Marine Engineering (Group) Company Limited (HKG:317) Could Be Worth Watching

CSSC Offshore & Marine Engineering (Group) Company Limited (HKG:317), might not be a large cap stock, but it led the SEHK gainers with a relatively large price hike in the past couple of weeks. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. As a HK$34b market-cap stock, it seems odd CSSC Offshore & Marine Engineering (Group) 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 CSSC Offshore & Marine Engineering (Group)’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

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What's The Opportunity In CSSC Offshore & Marine Engineering (Group)?

CSSC Offshore & Marine Engineering (Group) 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 CSSC Offshore & Marine Engineering (Group)’s ratio of 26.63x is above its peer average of 11.15x, which suggests the stock is trading at a higher price compared to the Machinery industry. Furthermore, CSSC Offshore & Marine Engineering (Group)’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

Check out our latest analysis for CSSC Offshore & Marine Engineering (Group)

Can we expect growth from CSSC Offshore & Marine Engineering (Group)?

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. 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. CSSC Offshore & Marine Engineering (Group)'s earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? 317’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe 317 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 317 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 positive outlook is encouraging for 317, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Diving deeper into the forecasts for CSSC Offshore & Marine Engineering (Group) mentioned earlier will help you understand how analysts view the stock going forward. So feel free to check out our free graph representing analyst forecasts.

If you are no longer interested in CSSC Offshore & Marine 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.