Yadea Group Holdings Ltd. (HKG:1585), might not be a large cap stock, but it saw a significant share price rise of 35% 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 mid-cap stock with high coverage by analysts, you could assume any recent changes in the company's outlook is already priced into the stock. However, what if the stock is still a bargain? Today we will analyse the most recent data on Yadea Group Holdings's outlook and valuation to see if the opportunity still exists.

What's The Opportunity In Yadea Group Holdings?

According to our 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. 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 Yadea Group Holdings's ratio of 15.66x is trading slightly above its industry peers' ratio of 13.78x, which means if you buy Yadea Group Holdings today, you'd be paying a relatively sensible price for it. And if you believe that Yadea Group Holdings should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Is there another opportunity to buy low in the future? Since Yadea Group Holdings'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.

Can we expect growth from Yadea Group Holdings?

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 74% over the next couple of years, the future seems bright for Yadea Group 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? It seems like the market has already priced in 1585'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 financial strength of the company. Have these factors changed since the last time you looked at 1585? 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 1585, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 1585, 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.

So while earnings quality is important, it's equally important to consider the risks facing Yadea Group Holdings at this point in time. Every company has risks, and we've spotted 1 warning sign for Yadea Group Holdings you should know about.

If you are no longer interested in Yadea Group 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.