Yangzijiang Shipbuilding (Holdings) Ltd. (SGX:BS6), which is in the machinery business, and is based in China, saw a significant share price rise of over 20% in the past couple of months on the SGX. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine Yangzijiang Shipbuilding (Holdings)’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in Yangzijiang Shipbuilding (Holdings)?
Good news, investors! Yangzijiang Shipbuilding (Holdings) is still a bargain right now. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Yangzijiang Shipbuilding (Holdings)’s ratio of 5.83x is below its peer average of 11.82x, which suggests the stock is undervalued compared to the Machinery industry. What’s more interesting is that, Yangzijiang Shipbuilding (Holdings)’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
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. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Yangzijiang Shipbuilding (Holdings), at least in the near future.
What this means for you:
Are you a shareholder? Although BS6 is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to BS6, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on BS6 for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Yangzijiang Shipbuilding (Holdings). You can find everything you need to know about Yangzijiang Shipbuilding (Holdings) in the latest infographic research report. If you are no longer interested in Yangzijiang Shipbuilding (Holdings), you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.