While AVIC Heavy Machinery Co., Ltd. (SHSE:600765) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the SHSE. 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 AVIC Heavy Machinery's valuation and outlook in more detail to determine if there's still a bargain opportunity.

See our latest analysis for AVIC Heavy Machinery

What's The Opportunity In AVIC Heavy Machinery?

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. I'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 39.4x is currently trading slightly above its industry peers' ratio of 35.21x, which means if you buy AVIC Heavy Machinery today, you'd be paying a relatively reasonable price for it. And if you believe AVIC Heavy Machinery 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 AVIC Heavy Machinery'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.

Can we expect growth from AVIC Heavy Machinery?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 70% over the next couple of years, the future seems bright for AVIC Heavy Machinery. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? 600765'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 600765? 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 600765, 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 600765, 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.

It can be quite valuable to consider what analysts expect for AVIC Heavy Machinery from their most recent forecasts. Luckily, you can check out what analysts are forecasting by clicking here.

If you are no longer interested in AVIC Heavy Machinery, 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.