Why Pyeong Hwa Automotive Co., Ltd. (KOSDAQ:043370) Could Be Worth Watching

Pyeong Hwa Automotive Co., Ltd. (KOSDAQ:043370), is not the largest company out there, but it led the KOSDAQ gainers with a relatively large price hike in the past couple of weeks. 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 Pyeong Hwa Automotive’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Pyeong Hwa Automotive

What is Pyeong Hwa Automotive worth?

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. I’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 27.64x is currently trading slightly above its industry peers’ ratio of 23.12x, which means if you buy Pyeong Hwa Automotive today, you’d be paying a relatively reasonable price for it. And if you believe Pyeong Hwa Automotive 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. Although, there may be an opportunity to buy in the future. This is because Pyeong Hwa Automotive’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Pyeong Hwa Automotive?

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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. In Pyeong Hwa Automotive's case, its earnings over the next year are expected to double, indicating an incredibly optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? A043370’s optimistic future growth appears to have been factored into the current share price, 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 A043370? 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 tabs on A043370, 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 A043370, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you'd like to know more about Pyeong Hwa Automotive as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 3 warning signs we've spotted with Pyeong Hwa Automotive (including 1 which is concerning).

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This article by Simply Wall St is general in nature. 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.
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