While BMC Medical Co., Ltd. (SZSE:301367) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the SZSE over the last few months, increasing to CN¥85.00 at one point, and dropping to the lows of CN¥62.92. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether BMC Medical's current trading price of CN¥65.82 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at BMC Medical's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's The Opportunity In BMC Medical?
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 38.5x is currently trading slightly above its industry peers' ratio of 34.43x, which means if you buy BMC Medical today, you'd be paying a relatively sensible price for it. And if you believe that BMC Medical should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. In addition to this, it seems like BMC Medical's share price is quite stable, which could mean there may be less chances to buy low in the future now that it's trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.
What does the future of BMC Medical 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. BMC Medical'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 301367'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 301367? 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 tabs on 301367, 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 301367, 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.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 2 warning signs for BMC Medical you should be aware of.
If you are no longer interested in BMC Medical, 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.