Is Now An Opportune Moment To Examine Yangzijiang Shipbuilding (Holdings) Ltd. (SGX:BS6)?

While Yangzijiang Shipbuilding (Holdings) Ltd. (SGX:BS6) might not have the largest market cap around , it saw a significant share price rise of 36% in the past couple of months on the SGX. The company is now trading at yearly-high levels following the recent surge in its share price. 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. However, what if the stock is still a bargain? Let’s take a look at Yangzijiang Shipbuilding (Holdings)’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Yangzijiang Shipbuilding (Holdings)

What's The Opportunity In Yangzijiang Shipbuilding (Holdings)?

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 9.84x is currently trading slightly above its industry peers’ ratio of 9.55x, which means if you buy Yangzijiang Shipbuilding (Holdings) today, you’d be paying a relatively sensible price for it. And if you believe Yangzijiang Shipbuilding (Holdings) 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 Yangzijiang Shipbuilding (Holdings)’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.

What kind of growth will Yangzijiang Shipbuilding (Holdings) generate?

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. Yangzijiang Shipbuilding (Holdings)'s earnings over the next few years are expected to increase by 35%, 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 BS6’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 BS6? 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 BS6, 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 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.

So while earnings quality is important, it's equally important to consider the risks facing Yangzijiang Shipbuilding (Holdings) at this point in time. At Simply Wall St, we found 1 warning sign for Yangzijiang Shipbuilding (Holdings) and we think they deserve your attention.

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.