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Zhengzhou Coal Mining Machinery Group Company Limited (HKG:564), which is in the machinery business, and is based in China, received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$4.59 at one point, and dropping to the lows of HK$3.72. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Zhengzhou Coal Mining Machinery Group's current trading price of HK$3.72 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 Zhengzhou Coal Mining Machinery Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Zhengzhou Coal Mining Machinery Group
What is Zhengzhou Coal Mining Machinery Group worth?
Good news, investors! Zhengzhou Coal Mining Machinery Group is still a bargain right now. 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 Zhengzhou Coal Mining Machinery Group’s ratio of 4.88x is below its peer average of 9.98x, which suggests the stock is undervalued compared to the Machinery industry. Another thing to keep in mind is that Zhengzhou Coal Mining Machinery Group’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What kind of growth will Zhengzhou Coal Mining Machinery Group generate?
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. 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 Zhengzhou Coal Mining Machinery Group, it is expected to deliver a relatively unexciting earnings growth of 5.6%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for Zhengzhou Coal Mining Machinery Group, at least in the near term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since 564 is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.