While Shenzhen Urban Transport Planning Center Co., Ltd. (SZSE:301091) might not have the largest market cap around , it saw a significant share price rise of 26% in the past couple of months on the SZSE. While good news for shareholders, the company has traded much higher in the past year. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let's examine Shenzhen Urban Transport Planning Center's valuation and outlook in more detail to determine if there's still a bargain opportunity.
Is Shenzhen Urban Transport Planning Center Still Cheap?
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. 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 Shenzhen Urban Transport Planning Center's ratio of 36.3x is trading slightly above its industry peers' ratio of 34.74x, which means if you buy Shenzhen Urban Transport Planning Center today, you'd be paying a relatively sensible price for it. And if you believe Shenzhen Urban Transport Planning Center 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. Is there another opportunity to buy low in the future? Since Shenzhen Urban Transport Planning Center's share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Shenzhen Urban Transport Planning Center generate?
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 77% over the next couple of years, the future seems bright for Shenzhen Urban Transport Planning Center. 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? It seems like the market has already priced in 301091'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 track record of its management team. Have these factors changed since the last time you looked at 301091? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you've been keeping an eye on 301091, 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 301091, 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.
If you'd like to know more about Shenzhen Urban Transport Planning Center as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that Shenzhen Urban Transport Planning Center has 2 warning signs and it would be unwise to ignore these.
If you are no longer interested in Shenzhen Urban Transport Planning Center, 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.
