Is Now The Time To Look At 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$11.24 at one point, and dropping to the lows of HK$8.62. 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$9.04 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 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.

See our latest analysis for Yue Yuen Industrial (Holdings)

Is Yue Yuen Industrial (Holdings) Still Cheap?

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. 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 Yue Yuen Industrial (Holdings)’s ratio of 9.1x is trading in-line with its industry peers’ ratio, which means if you buy Yue Yuen Industrial (Holdings) today, you’d be paying a relatively reasonable price for it. So, is there another chance to buy low in the future? Given that Yue Yuen Industrial (Holdings)’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Yue Yuen Industrial (Holdings)?

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. With profit expected to grow by 58% over the next couple of years, the future seems bright for Yue Yuen Industrial (Holdings). 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 551’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 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 an eye on 551, now may not be the most optimal 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example - Yue Yuen Industrial (Holdings) has 1 warning sign we think you should be aware of.

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.