ANE (Cayman) Inc. (HKG:9956), might not be a large cap stock, but it saw a significant share price rise of 47% in the past couple of months on the SEHK. While good news for shareholders, the company has traded much higher in the past year. As a stock with high coverage by analysts, you could assume any recent changes in the company's outlook is already priced into the stock. But what if there is still an opportunity to buy? Today we will analyse the most recent data on ANE (Cayman)'s outlook and valuation to see if the opportunity still exists.
What's The Opportunity In ANE (Cayman)?
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 ANE (Cayman)'s ratio of 13.51x is trading slightly below its industry peers' ratio of 16.59x, which means if you buy ANE (Cayman) today, you'd be paying a reasonable price for it. And if you believe ANE (Cayman) should be trading in this range, then there isn't much room for the share price to grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since ANE (Cayman)'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 ANE (Cayman) generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 61% over the next couple of years, the future seems bright for ANE (Cayman). 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? It seems like the market has already priced in 9956's positive outlook, 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 9956? 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 9956, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 9956, 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.
It can be quite valuable to consider what analysts expect for ANE (Cayman) from their most recent forecasts. Luckily, you can check out what analysts are forecasting by clicking here.
If you are no longer interested in ANE (Cayman), 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.