Sinotruk Jinan Truck Co., Ltd. (SZSE:000951), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the SZSE. 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? Today I will analyse the most recent data on Sinotruk Jinan Truck's outlook and valuation to see if the opportunity still exists.

See our latest analysis for Sinotruk Jinan Truck

What's the opportunity in Sinotruk Jinan Truck?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. I find that Sinotruk Jinan Truck's ratio of 24.24x is trading slightly below its industry peers' ratio of 29.09x, which means if you buy Sinotruk Jinan Truck today, you'd be paying a reasonable price for it. And if you believe that Sinotruk Jinan Truck 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. Although, there may be an opportunity to buy in the future. This is because Sinotruk Jinan Truck's beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Sinotruk Jinan Truck 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. With profit expected to more than double over the next couple of years, the future seems bright for Sinotruk Jinan Truck. 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 already priced in 000951'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 000951? 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 an eye on 000951, 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 000951, 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.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. At Simply Wall St, we found 3 warning signs for Sinotruk Jinan Truck and we think they deserve your attention.

If you are no longer interested in Sinotruk Jinan Truck, 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.