Shanghai Zhangjiang Hi-Tech Park Development Co., Ltd. (SHSE:600895), might not be a large cap stock, but it saw a significant share price rise of 62% in the past couple of months on the SHSE. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. As a CN¥41b market-cap stock, it seems odd Shanghai Zhangjiang Hi-Tech Park Development is not more well-covered by analysts. Although, there is more of an opportunity for mispricing in stocks with low coverage, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today we will analyse the most recent data on Shanghai Zhangjiang Hi-Tech Park Development's outlook and valuation to see if the opportunity still exists.

What's The Opportunity In Shanghai Zhangjiang Hi-Tech Park Development?

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. We'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 49.47x is currently trading slightly above its industry peers' ratio of 46.66x, which means if you buy Shanghai Zhangjiang Hi-Tech Park Development today, you'd be paying a relatively sensible price for it. And if you believe Shanghai Zhangjiang Hi-Tech Park Development 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. Furthermore, it seems like Shanghai Zhangjiang Hi-Tech Park Development's share price is quite stable, which means there may be less chances to buy low in the future now that it's priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Shanghai Zhangjiang Hi-Tech Park Development 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. Shanghai Zhangjiang Hi-Tech Park Development's earnings over the next few years are expected to increase by 31%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? 600895'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 600895? 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 600895, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 600895, 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.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. For example, Shanghai Zhangjiang Hi-Tech Park Development has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

If you are no longer interested in Shanghai Zhangjiang Hi-Tech Park Development, 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.