Ganyuan Foods Co., Ltd. (SZSE:002991), is not the largest company out there, but it received a lot of attention from a substantial price movement on the SZSE over the last few months, increasing to CN¥83.10 at one point, and dropping to the lows of CN¥64.78. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Ganyuan Foods' current trading price of CN¥64.78 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Ganyuan Foods's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for Ganyuan Foods
Is Ganyuan Foods Still Cheap?
Great news for investors – Ganyuan Foods is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 25.07x is currently well-below the industry average of 33.41x, meaning that it is trading at a cheaper price relative to its peers. Ganyuan Foods's share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it's there, it may be hard to fall back down into an attractive buying range.
What does the future of Ganyuan Foods 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 grow by 66% over the next couple of years, the future seems bright for Ganyuan Foods. 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? Since 002991 is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With a positive profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you've been keeping an eye on 002991 for a while, now might be the time to make a leap. Its buoyant future profit outlook isn't fully reflected in the current share price yet, which means it's not too late to buy 002991. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.
So while earnings quality is important, it's equally important to consider the risks facing Ganyuan Foods at this point in time. Case in point: We've spotted 1 warning sign for Ganyuan Foods you should be aware of.
If you are no longer interested in Ganyuan Foods, 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.