Jiangsu Guomao Reducer Co., Ltd. (SHSE:603915), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the SHSE over the last few months. As a CN¥15b market-cap stock, it seems odd Jiangsu Guomao Reducer 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 take a look at Jiangsu Guomao Reducer's outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for Jiangsu Guomao Reducer

What is Jiangsu Guomao Reducer worth?

According to my 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. I'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 33.7x is currently trading slightly below its industry peers' ratio of 34.71x, which means if you buy Jiangsu Guomao Reducer today, you'd be paying a decent price for it. And if you believe that Jiangsu Guomao Reducer should be trading at this level in the long run, then there's not much of an upside to gain over and above other industry peers. So, is there another chance to buy low in the future? Given that Jiangsu Guomao Reducer'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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Jiangsu Guomao Reducer generate?

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. With profit expected to grow by 70% over the next couple of years, the future seems bright for Jiangsu Guomao Reducer. 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? 603915'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 track record of its management team. Have these factors changed since the last time you looked at 603915? 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 an eye on 603915, 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 603915, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For instance, we've identified 3 warning signs for Jiangsu Guomao Reducer (1 can't be ignored) you should be familiar with.

If you are no longer interested in Jiangsu Guomao Reducer, 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.