Zhuzhou Hongda Electronics Corp.,Ltd. (SZSE:300726), is not the largest company out there, but it received a lot of attention from a substantial price increase on the SZSE over the last few months. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let's take a look at Zhuzhou Hongda ElectronicsLtd's outlook and value based on the most recent financial data to see if the opportunity still exists.

What Is Zhuzhou Hongda ElectronicsLtd Worth?

Great news for investors – Zhuzhou Hongda ElectronicsLtd 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 Zhuzhou Hongda ElectronicsLtd's ratio of 37.2x is below its peer average of 47.72x, which indicates the stock is trading at a lower price compared to the Electronic industry. However, given that Zhuzhou Hongda ElectronicsLtd'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 does the future of Zhuzhou Hongda ElectronicsLtd look like?

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 Zhuzhou Hongda ElectronicsLtd. 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 300726 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 financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you've been keeping an eye on 300726 for a while, now might be the time to make a leap. Its buoyant future profit outlook isn't fully reflected in the current share price yet, which means it's not too late to buy 300726. 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 investment decision.

If you'd like to know more about Zhuzhou Hongda ElectronicsLtd as a business, it's important to be aware of any risks it's facing. For example, we've discovered 4 warning signs that you should run your eye over to get a better picture of Zhuzhou Hongda ElectronicsLtd.

If you are no longer interested in Zhuzhou Hongda ElectronicsLtd, 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.