China Yuchai International Limited (NYSE:CYD), which is in the machinery business, and is based in Singapore, saw a significant share price rise of over 20% in the past couple of months on the NYSE. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on China Yuchai International’s outlook and valuation to see if the opportunity still exists.
Is China Yuchai International still cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 2.09% above my intrinsic value, which means if you buy China Yuchai International today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth $11.73, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because China Yuchai International’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will China Yuchai International generate?
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 57% over the next couple of years, the future seems bright for China Yuchai International. 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 CYD’s positive outlook, with shares trading around its fair value. 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 the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on CYD, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, 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.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on China Yuchai International. You can find everything you need to know about China Yuchai International in the latest infographic research report. If you are no longer interested in China Yuchai International, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.