Is Now The Time To Look At Buying Leoch International Technology Limited (HKG:842)?

Leoch International Technology Limited (HKG:842), might not be a large cap stock, but it received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$2.40 at one point, and dropping to the lows of HK$1.40. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Leoch International Technology's current trading price of HK$1.40 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Leoch International Technology’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Leoch International Technology

Is Leoch International Technology Still Cheap?

Good news, investors! Leoch International Technology is still a bargain right now according to my price multiple model, which compares 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 Leoch International Technology’s ratio of 3.81x is below its peer average of 10.57x, which indicates the stock is trading at a lower price compared to the Electrical industry. Leoch International Technology’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 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.

What does the future of Leoch International Technology look like?

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. With profit expected to grow by 92% over the next couple of years, the future seems bright for Leoch International Technology. 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? Since 842 is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on 842 for a while, now might be the time to enter the stock. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 842. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

So while earnings quality is important, it's equally important to consider the risks facing Leoch International Technology at this point in time. In terms of investment risks, we've identified 2 warning signs with Leoch International Technology, and understanding these should be part of your investment process.

If you are no longer interested in Leoch International Technology, 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.