While Chaozhou Three-Circle (Group) Co.,Ltd. (SZSE:300408) might not have the largest market cap around , it led the SZSE gainers with a relatively large price hike in the past couple of weeks. The company is inching closer to its yearly highs following the recent share price climb. 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, could the stock still be trading at a relatively cheap price? Let's examine Chaozhou Three-Circle (Group)Ltd's valuation and outlook in more detail to determine if there's still a bargain opportunity.

What Is Chaozhou Three-Circle (Group)Ltd Worth?

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 36.85x is currently trading slightly below its industry peers' ratio of 37.24x, which means if you buy Chaozhou Three-Circle (Group)Ltd today, you'd be paying a decent price for it. And if you believe Chaozhou Three-Circle (Group)Ltd 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. Furthermore, it seems like Chaozhou Three-Circle (Group)Ltd's share price is quite stable, which means there may be less chances to buy low in the future now that it's priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Chaozhou Three-Circle (Group)Ltd?

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. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Chaozhou Three-Circle (Group)Ltd's earnings over the next few years are expected to increase by 55%, 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 300408'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 financial strength of the company. Have these factors changed since the last time you looked at 300408? 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 tabs on 300408, 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 300408, 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. For example - Chaozhou Three-Circle (Group)Ltd has 2 warning signs we think you should be aware of.

If you are no longer interested in Chaozhou Three-Circle (Group)Ltd, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com