What Does Grand Baoxin Auto Group Limited's (HKG:1293) Share Price Indicate?

While Grand Baoxin Auto Group Limited (HKG:1293) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the SEHK over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Grand Baoxin Auto Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Grand Baoxin Auto Group

Is Grand Baoxin Auto Group still cheap?

Great news for investors – Grand Baoxin Auto Group is still trading at a fairly cheap price 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 Grand Baoxin Auto Group’s ratio of 3.25x is below its peer average of 10.68x, which indicates the stock is trading at a lower price compared to the Specialty Retail industry. Grand Baoxin Auto Group’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 Grand Baoxin Auto Group look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. Grand Baoxin Auto Group's earnings over the next few years are expected to increase by 54%, 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? Since 1293 is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic profit 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 capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on 1293 for a while, now might be the time to enter the stock. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 1293. 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 assessment.

If you'd like to know more about Grand Baoxin Auto Group as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for Grand Baoxin Auto Group you should be mindful of and 1 of them is potentially serious.

If you are no longer interested in Grand Baoxin Auto Group, 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.