While Chengdu Guibao Science & Technology Co.,Ltd. (SZSE:300019) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the SZSE over the last few months. As a small cap stock, which tends to lack high analyst coverage, 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? Today I will analyse the most recent data on Chengdu Guibao Science & TechnologyLtd's outlook and valuation to see if the opportunity still exists.

See our latest analysis for Chengdu Guibao Science & TechnologyLtd

Is Chengdu Guibao Science & TechnologyLtd Still Cheap?

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 31.63x is currently trading slightly above its industry peers' ratio of 28.41x, which means if you buy Chengdu Guibao Science & TechnologyLtd today, you'd be paying a relatively reasonable price for it. And if you believe Chengdu Guibao Science & TechnologyLtd should be trading in this range, then there isn't really any room for the share price grow beyond the levels of other industry peers over the long-term. In addition to this, it seems like Chengdu Guibao Science & TechnologyLtd's share price is quite stable, which could mean there may be less chances to buy low in the future now that it's trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Chengdu Guibao Science & TechnologyLtd 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 80% over the next couple of years, the future seems bright for Chengdu Guibao Science & TechnologyLtd. 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? 300019'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 financial strength of the company. Have these factors changed since the last time you looked at 300019? 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 tabs on 300019, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 300019, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Our analysis shows 2 warning signs for Chengdu Guibao Science & TechnologyLtd (1 is concerning!) and we strongly recommend you look at these before investing.

If you are no longer interested in Chengdu Guibao Science & TechnologyLtd, 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.