SINOMACH HEAVY EQUIPMENT GROUP CO.,LTD (SHSE:601399), might not be a large cap stock, but it saw a double-digit share price rise of over 10% 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¥22b market cap stock, it seems odd SINOMACH HEAVY EQUIPMENT GROUPLTD 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? Let's examine SINOMACH HEAVY EQUIPMENT GROUPLTD's valuation and outlook in more detail to determine if there's still a bargain opportunity.

Is SINOMACH HEAVY EQUIPMENT GROUPLTD Still Cheap?

According to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 44.8x is currently well-above the industry average of 34.25x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, SINOMACH HEAVY EQUIPMENT GROUPLTD's share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it's there, it may be hard to fall back down into an attractive buying range.

What kind of growth will SINOMACH HEAVY EQUIPMENT GROUPLTD 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. 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 59% over the next couple of years, the future seems bright for SINOMACH HEAVY EQUIPMENT GROUPLTD. 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 well and truly priced in 601399's positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe 601399 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you've been keeping tabs on 601399 for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for 601399, which means it's worth diving deeper into other factors in order to take advantage of the next price drop.

Diving deeper into the forecasts for SINOMACH HEAVY EQUIPMENT GROUPLTD mentioned earlier will help you understand how analysts view the stock going forward. So feel free to check out our free graph representing analyst forecasts.

If you are no longer interested in SINOMACH HEAVY EQUIPMENT GROUPLTD, 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.