At HK$3.86, Is Yuexiu Transport Infrastructure Limited (HKG:1052) Worth Looking At Closely?

While Yuexiu Transport Infrastructure Limited (HKG:1052) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$4.58 at one point, and dropping to the lows of HK$3.86. 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 Yuexiu Transport Infrastructure's current trading price of HK$3.86 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 Yuexiu Transport Infrastructure’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 Yuexiu Transport Infrastructure

Is Yuexiu Transport Infrastructure Still Cheap?

The share price seems sensible at the moment 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 7.75x is currently trading slightly above its industry peers’ ratio of 6.88x, which means if you buy Yuexiu Transport Infrastructure today, you’d be paying a relatively reasonable price for it. And if you believe Yuexiu Transport Infrastructure should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. In addition to this, it seems like Yuexiu Transport Infrastructure’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Yuexiu Transport Infrastructure?

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. Yuexiu Transport Infrastructure's earnings over the next few years are expected to increase by 33%, 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? It seems like the market has already priced in 1052’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 track record of its management team. Have these factors changed since the last time you looked at 1052? 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 1052, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 1052, 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, Yuexiu Transport Infrastructure has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

If you are no longer interested in Yuexiu Transport Infrastructure, 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.