When Should You Buy Yue Yuen Industrial (Holdings) Limited (HKG:551)?

Yue Yuen Industrial (Holdings) Limited (HKG:551), might not be a large cap stock, but it saw a decent share price growth of 19% on the SEHK over the last few months. 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 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. But what if there is still an 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 the opportunity still exists.

See our latest analysis for Yue Yuen Industrial (Holdings)

What Is Yue Yuen Industrial (Holdings) Worth?

Great news for investors – Yue Yuen Industrial (Holdings) is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’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 7.27x is currently well-below the industry average of 9.92x, meaning that it is trading at a cheaper price relative to its peers. However, 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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

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. However, with a relatively muted profit growth of 5.3% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Yue Yuen Industrial (Holdings), at least in the short term.

What This Means For You

Are you a shareholder? Even though growth is relatively muted, since 551 is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. 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 551 for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 551. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

So while earnings quality is important, it's equally important to consider the risks facing Yue Yuen Industrial (Holdings) at this point in time. You'd be interested to know, that we found 1 warning sign for Yue Yuen Industrial (Holdings) and you'll want to know about it.

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.