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Are Investors Undervaluing China Yuchai (CYD) Right Now?

Zacks Equity Research

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One stock to keep an eye on is China Yuchai (CYD). CYD is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock holds a P/E ratio of 5.51, while its industry has an average P/E of 10.07. CYD's Forward P/E has been as high as 8.10 and as low as 4.67, with a median of 6.34, all within the past year.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. CYD has a P/S ratio of 0.24. This compares to its industry's average P/S of 0.39.

Finally, investors should note that CYD has a P/CF ratio of 3.66. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 5.88. CYD's P/CF has been as high as 4.72 and as low as 2.22, with a median of 3.61, all within the past year.

These are just a handful of the figures considered in China Yuchai's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that CYD is an impressive value stock right now.


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