Hangzhou Greatstar Industrial Co., Ltd (SZSE:002444), might not be a large cap stock, but 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 take a look at Hangzhou Greatstar Industrial's outlook and value based on the most recent financial data to see if the opportunity still exists.

What Is Hangzhou Greatstar Industrial Worth?

Great news for investors – Hangzhou Greatstar Industrial is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. we find that Hangzhou Greatstar Industrial's ratio of 17.05x is below its peer average of 23.37x, which indicates the stock is trading at a lower price compared to the Consumer Durables industry. However, given that Hangzhou Greatstar Industrial'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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Hangzhou Greatstar Industrial generate?

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. With profit expected to grow by 37% over the next couple of years, the future seems bright for Hangzhou Greatstar Industrial. 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? Since 002444 is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you've been keeping an eye on 002444 for a while, now might be the time to enter the stock. Its buoyant future profit outlook isn't fully reflected in the current share price yet, which means it's not too late to buy 002444. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed assessment.

So while earnings quality is important, it's equally important to consider the risks facing Hangzhou Greatstar Industrial at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Hangzhou Greatstar Industrial.

If you are no longer interested in Hangzhou Greatstar Industrial, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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