Johnson Electric Holdings Limited (HKG:179), is not the largest company out there, but it saw a double-digit share price rise of over 10% 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 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 we will analyse the most recent data on Johnson Electric Holdings’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for Johnson Electric Holdings
What Is Johnson Electric Holdings Worth?
Good news, investors! Johnson Electric Holdings is still a bargain right now according to our price multiple model, which compares 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 Johnson Electric Holdings’s ratio of 5.88x is below its peer average of 7.54x, which indicates the stock is trading at a lower price compared to the Auto Components industry. Although, there may be another chance to buy again in the future. This is because Johnson Electric Holdings’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 Johnson Electric Holdings 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. Though in the case of Johnson Electric Holdings, it is expected to deliver a relatively unexciting earnings growth of 0.5%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What This Means For You
Are you a shareholder? Even though growth is relatively muted, since 179 is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on 179 for a while, now might be the time to enter the stock. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 179. 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.
So while earnings quality is important, it's equally important to consider the risks facing Johnson Electric Holdings at this point in time. Case in point: We've spotted 2 warning signs for Johnson Electric Holdings you should be mindful of and 1 of these is potentially serious.
If you are no longer interested in Johnson Electric 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.