Estun Automation Co., Ltd (SZSE:002747), might not be a large cap stock, but it led the SZSE gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock's share price. However, what if the stock is still a bargain? Let's examine Estun Automation's valuation and outlook in more detail to determine if there's still a bargain opportunity.

View our latest analysis for Estun Automation

What is Estun Automation worth?

The stock seems fairly valued at the moment according to my valuation model. It's trading around 14% below my intrinsic value, which means if you buy Estun Automation today, you'd be paying a reasonable price for it. And if you believe that the stock is really worth CN¥28.86, then there isn't much room for the share price grow beyond what it's currently trading. What's more, Estun Automation's share price may be more stable over time (relative to the market), as indicated by its low beta.

Can we expect growth from Estun Automation?

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 Estun Automation. 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 002747's positive outlook, with shares trading around its fair value. 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you've been keeping tabs on 002747, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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 while earnings quality is important, it's equally important to consider the risks facing Estun Automation at this point in time. Case in point: We've spotted 3 warning signs for Estun Automation you should be mindful of and 1 of these doesn't sit too well with us.

If you are no longer interested in Estun Automation, 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.