China Yuchai International Limited (NYSE:CYD), which is in the machinery business, and is based in Singapore, saw significant share price volatility over the past couple of months on the NYSE, rising to the highs of $20.41 and falling to the lows of $13.08. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether China Yuchai International’s current trading price of $13.08 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at China Yuchai International’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What’s the opportunity in China Yuchai International?
Great news for investors – China Yuchai International is still trading at a fairly cheap price. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that China Yuchai International’s ratio of 4.05x is below its peer average of 19.49x, which suggests the stock is undervalued compared to the Machinery industry. What’s more interesting is that, China Yuchai International’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. 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 does the future of China Yuchai International look like?
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. 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. China Yuchai International’s earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? Since CYD is currently undervalued, it may be a great time to increase your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on CYD for a while, now might be the time to make a leap. Its prosperous future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy CYD. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.
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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.