China MeiDong Auto Holdings Limited (HKG:1268), might not be a large cap stock, but it saw a significant share price rise of 57% in the past couple of months on the SEHK. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock's share price. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on China MeiDong Auto Holdings's outlook and valuation to see if the opportunity still exists.

What's The Opportunity In China MeiDong Auto Holdings?

China MeiDong Auto Holdings is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison 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 China MeiDong Auto Holdings's ratio of 43.13x is above its peer average of 9.25x, which suggests the stock is trading at a higher price compared to the Specialty Retail industry. But, is there another opportunity to buy low in the future? Given that China MeiDong Auto Holdings'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 China MeiDong Auto Holdings 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. 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. China MeiDong Auto Holdings' earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? 1268's optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe 1268 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you've been keeping tabs on 1268 for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for 1268, which means it's worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about China MeiDong Auto Holdings as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that China MeiDong Auto Holdings has 3 warning signs and it would be unwise to ignore them.

If you are no longer interested in China MeiDong Auto Holdings, 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.