Is It Too Late To Consider Buying Sunny Optical Technology (Group) Company Limited (HKG:2382)?

Let's talk about the popular Sunny Optical Technology (Group) Company Limited (HKG:2382). The company's shares led the SEHK gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Sunny Optical Technology (Group)’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Sunny Optical Technology (Group)

What's the opportunity in Sunny Optical Technology (Group)?

Sunny Optical Technology (Group) appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and 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 Sunny Optical Technology (Group)’s ratio of 22.12x is above its peer average of 7.1x, which suggests the stock is trading at a higher price compared to the Electronic industry. But, is there another opportunity to buy low in the future? Given that Sunny Optical Technology (Group)’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 Sunny Optical Technology (Group) 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. With profit expected to grow by 54% over the next couple of years, the future seems bright for Sunny Optical Technology (Group). 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 well and truly priced in 2382’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe 2382 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on 2382 for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for 2382, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Diving deeper into the forecasts for Sunny Optical Technology (Group) mentioned earlier will help you understand how analysts view the stock going forward. So feel free to check out our free graph representing analyst forecasts.

If you are no longer interested in Sunny Optical Technology (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.