At S$1.49, Is It Time To Put Yangzijiang Shipbuilding (Holdings) Ltd. (SGX:BS6) On Your Watch List?

Yangzijiang Shipbuilding (Holdings) Ltd. (SGX:BS6), is not the largest company out there, but it saw a decent share price growth in the teens level on the SGX over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine Yangzijiang Shipbuilding (Holdings)’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Yangzijiang Shipbuilding (Holdings)

Is Yangzijiang Shipbuilding (Holdings) still cheap?

According to my 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. 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 7.39x is currently trading slightly below its industry peers’ ratio of 10.64x, which means if you buy Yangzijiang Shipbuilding (Holdings) today, you’d be paying a reasonable price for it. And if you believe Yangzijiang Shipbuilding (Holdings) should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that Yangzijiang Shipbuilding (Holdings)’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Yangzijiang Shipbuilding (Holdings)?

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 24% over the next couple of years, the future seems bright for Yangzijiang Shipbuilding (Holdings). 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? BS6’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 BS6? 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 BS6, 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 BS6, 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.

If you'd like to know more about Yangzijiang Shipbuilding (Holdings) as a business, it's important to be aware of any risks it's facing. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Yangzijiang Shipbuilding (Holdings).

If you are no longer interested in Yangzijiang Shipbuilding (Holdings), 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.