Hangzhou Lion Electronics Co.,Ltd (SHSE:605358), is not the largest company out there, but it received a lot of attention from a substantial price movement on the SHSE over the last few months, increasing to CN¥35.25 at one point, and dropping to the lows of CN¥25.86. 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 Hangzhou Lion ElectronicsLtd's current trading price of CN¥26.54 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Hangzhou Lion ElectronicsLtd'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 Hangzhou Lion ElectronicsLtd
Is Hangzhou Lion ElectronicsLtd Still Cheap?
The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. We find that Hangzhou Lion ElectronicsLtd's ratio of 77.5x is trading slightly above its industry peers' ratio of 67.85x, which means if you buy Hangzhou Lion ElectronicsLtd today, you'd be paying a relatively reasonable price for it. And if you believe Hangzhou Lion ElectronicsLtd 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. Is there another opportunity to buy low in the future? Since Hangzhou Lion ElectronicsLtd's share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Hangzhou Lion ElectronicsLtd 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. 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. Hangzhou Lion ElectronicsLtd's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? 605358'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 track record of its management team. Have these factors changed since the last time you looked at 605358? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you've been keeping tabs on 605358, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 605358, 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.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example, we've found that Hangzhou Lion ElectronicsLtd has 3 warning signs (1 is a bit unpleasant!) that deserve your attention before going any further with your analysis.
If you are no longer interested in Hangzhou Lion ElectronicsLtd, 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.