What Does Ample Electronic Technology Co.,Ltd.'s (GTSM:4760) Share Price Indicate?

Ample Electronic Technology Co.,Ltd. (GTSM:4760), is not the largest company out there, but 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? Today I will analyse the most recent data on Ample Electronic TechnologyLtd’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for Ample Electronic TechnologyLtd

Is Ample Electronic TechnologyLtd 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. 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 29.25x is trading slightly above its industry peers’ ratio of 26.04x, which means if you buy Ample Electronic TechnologyLtd today, you’d be paying a relatively sensible price for it. And if you believe Ample Electronic TechnologyLtd 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. So, is there another chance to buy low in the future? Given that Ample Electronic TechnologyLtd’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 Ample Electronic TechnologyLtd?

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. In Ample Electronic TechnologyLtd's case, its revenues are expected to grow by 43% over the next year, indicating a highly optimistic future ahead. If expense does not increase by the same rate, or higher, this top line growth should lead to stronger cash flows, feeding into a higher share value.

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 financial strength of the company. Have these factors changed since the last time you looked at 4760? 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 4760, 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 4760, 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.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Our analysis shows 3 warning signs for Ample Electronic TechnologyLtd (2 are a bit unpleasant!) and we strongly recommend you look at these before investing.

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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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