Is Ample Electronic Technology Co.,Ltd. (GTSM:4760) Potentially Undervalued?

While Ample Electronic Technology Co.,Ltd. (GTSM:4760) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the GTSM over the last few months. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Ample Electronic TechnologyLtd’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Ample Electronic TechnologyLtd

What's the opportunity in Ample Electronic TechnologyLtd?

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. 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 Ample Electronic TechnologyLtd’s ratio of 26.38x is trading slightly below its industry peers’ ratio of 29.21x, which means if you buy Ample Electronic TechnologyLtd today, you’d be paying a reasonable price for it. And if you believe that Ample Electronic TechnologyLtd 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. Is there another opportunity to buy low in the future? Since Ample Electronic TechnologyLtd’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 Ample Electronic TechnologyLtd?

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. With revenues expected to grow by 45% over the next year, the future seems bright for Ample Electronic TechnologyLtd. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock in the upcoming year, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? 4760’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 4760? 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 4760, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 4760, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To that end, you should learn about the 3 warning signs we've spotted with Ample Electronic TechnologyLtd (including 2 which are potentially serious).

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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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