Guangdong Xinbao Electrical Appliances Holdings Co., Ltd (SZSE:002705), 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¥18.26 at one point, and dropping to the lows of CN¥15.85. 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 Guangdong Xinbao Electrical Appliances Holdings' current trading price of CN¥16.42 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 Guangdong Xinbao Electrical Appliances Holdings's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Guangdong Xinbao Electrical Appliances Holdings
Is Guangdong Xinbao Electrical Appliances Holdings Still Cheap?
Good news, investors! Guangdong Xinbao Electrical Appliances Holdings is still a bargain right now according to my price multiple model, which compares 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 Guangdong Xinbao Electrical Appliances Holdings's ratio of 15.83x is below its peer average of 24.02x, which indicates the stock is trading at a lower price compared to the Consumer Durables industry. Guangdong Xinbao Electrical Appliances Holdings'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 kind of growth will Guangdong Xinbao Electrical Appliances Holdings 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 grow by 44% over the next couple of years, the future seems bright for Guangdong Xinbao Electrical Appliances Holdings. 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 002705 is currently trading below the industry PE ratio, it may be a great time to increase 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 002705 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 002705. 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 assessment.
Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To that end, you should learn about the 2 warning signs we've spotted with Guangdong Xinbao Electrical Appliances Holdings (including 1 which makes us a bit uncomfortable).
If you are no longer interested in Guangdong Xinbao Electrical Appliances Holdings, 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.