Why Dongsung FineTec Co., Ltd. (KOSDAQ:033500) Could Be Worth Watching

Dongsung FineTec Co., Ltd. (KOSDAQ:033500), might not be a large cap stock, but it saw a decent share price growth of 18% on the KOSDAQ over the last few months. The company is inching closer to its yearly highs following the recent share price climb. As a small cap stock, which tends to lack high analyst coverage, 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? Today we will analyse the most recent data on Dongsung FineTec’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Dongsung FineTec

What's The Opportunity In Dongsung FineTec?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 11.59x is currently trading slightly below its industry peers’ ratio of 13.02x, which means if you buy Dongsung FineTec today, you’d be paying a reasonable price for it. And if you believe that Dongsung FineTec should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. In addition to this, it seems like Dongsung FineTec’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 Dongsung FineTec?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 44% over the next couple of years, the future seems bright for Dongsung FineTec. 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? A033500’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 track record of its management team. Have these factors changed since the last time you looked at A033500? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on A033500, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for A033500, 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. You'd be interested to know, that we found 1 warning sign for Dongsung FineTec and you'll want to know about it.

If you are no longer interested in Dongsung FineTec, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com