Shenzhen JPT Opto-Electronics Co., Ltd. (SHSE:688025), 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 SHSE. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let's take a look at Shenzhen JPT Opto-Electronics's outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Shenzhen JPT Opto-Electronics

What's the opportunity in Shenzhen JPT Opto-Electronics?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 Shenzhen JPT Opto-Electronics's ratio of 43.52x is above its peer average of 31.05x, which suggests the stock is trading at a higher price compared to the Electronic industry. In addition to this, it seems like Shenzhen JPT Opto-Electronics's share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Shenzhen JPT Opto-Electronics 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 more than double over the next couple of years, the future seems bright for Shenzhen JPT Opto-Electronics. 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? 688025's optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe 688025 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 an eye on 688025 for a while, 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 688025, which means it's worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Shenzhen JPT Opto-Electronics as a business, it's important to be aware of any risks it's facing. Be aware that Shenzhen JPT Opto-Electronics is showing 3 warning signs in our investment analysis and 1 of those shouldn't be ignored...

If you are no longer interested in Shenzhen JPT Opto-Electronics, 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.