What Does Sinotruk (Hong Kong) Limited's (HKG:3808) Share Price Indicate?

Sinotruk (Hong Kong) Limited (HKG:3808), is not the largest company out there, but it received a lot of attention from a substantial price increase on the SEHK over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Today I will analyse the most recent data on Sinotruk (Hong Kong)’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Sinotruk (Hong Kong)

Is Sinotruk (Hong Kong) Still Cheap?

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 12.12x is currently trading slightly above its industry peers’ ratio of 11.17x, which means if you buy Sinotruk (Hong Kong) today, you’d be paying a relatively sensible price for it. And if you believe Sinotruk (Hong Kong) 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. Furthermore, it seems like Sinotruk (Hong Kong)’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 kind of growth will Sinotruk (Hong Kong) generate?

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. With profit expected to more than double over the next couple of years, the future seems bright for Sinotruk (Hong Kong). It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in 3808’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 track record of its management team. Have these factors changed since the last time you looked at 3808? 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 an eye on 3808, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 3808, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Sinotruk (Hong Kong), you'd also look into what risks it is currently facing. For example, we've found that Sinotruk (Hong Kong) has 3 warning signs (1 is significant!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Sinotruk (Hong Kong), 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.