While Lingyi iTech (Guangdong) Company (SZSE:002600) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the SZSE over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock's share price. However, what if the stock is still a bargain? Let's examine Lingyi iTech (Guangdong)'s valuation and outlook in more detail to determine if there's still a bargain opportunity.
Check out our latest analysis for Lingyi iTech (Guangdong)
What Is Lingyi iTech (Guangdong) Worth?
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. 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 Lingyi iTech (Guangdong)'s ratio of 38.21x is trading slightly below its industry peers' ratio of 39.91x, which means if you buy Lingyi iTech (Guangdong) today, you'd be paying a decent price for it. And if you believe Lingyi iTech (Guangdong) 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, Lingyi iTech (Guangdong)'s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What does the future of Lingyi iTech (Guangdong) look like?
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. Lingyi iTech (Guangdong)'s 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? It seems like the market has already priced in 002600'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 002600? 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 an eye on 002600, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 002600, 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.
So while earnings quality is important, it's equally important to consider the risks facing Lingyi iTech (Guangdong) at this point in time. In terms of investment risks, we've identified 2 warning signs with Lingyi iTech (Guangdong), and understanding them should be part of your investment process.
If you are no longer interested in Lingyi iTech (Guangdong), 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.