Is It Time To Consider Buying Yue Yuen Industrial (Holdings) Limited (HKG:551)?

Yue Yuen Industrial (Holdings) Limited (HKG:551), 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$13.16 at one point, and dropping to the lows of HK$10.60. 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 Yue Yuen Industrial (Holdings)'s current trading price of HK$10.64 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Yue Yuen Industrial (Holdings)’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 Yue Yuen Industrial (Holdings)

What Is Yue Yuen Industrial (Holdings) Worth?

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. 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 7.36x is currently trading slightly below its industry peers’ ratio of 9.14x, which means if you buy Yue Yuen Industrial (Holdings) today, you’d be paying a decent price for it. And if you believe Yue Yuen Industrial (Holdings) 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. Although, there may be an opportunity to buy in the future. This is because Yue Yuen Industrial (Holdings)’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Yue Yuen Industrial (Holdings) generate?

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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Yue Yuen Industrial (Holdings)'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? 551’s optimistic future growth appears to have been factored into the current share price, 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 551? 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 551, 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 551, 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'd like to know more about Yue Yuen Industrial (Holdings) as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Yue Yuen Industrial (Holdings), and understanding this should be part of your investment process.

If you are no longer interested in Yue Yuen Industrial (Holdings), 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.