Back to top

Image: Bigstock

Should Value Investors Buy China Yuchai (CYD) Stock?

Read MoreHide Full Article

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.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

One company value investors might notice is China Yuchai (CYD - Free Report) . CYD is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 7.14 right now. For comparison, its industry sports an average P/E of 16.59. Over the past 52 weeks, CYD's Forward P/E has been as high as 9.79 and as low as 3, with a median of 6.89.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. CYD has a P/S ratio of 0.26. This compares to its industry's average P/S of 0.64.

Finally, investors should note that CYD has a P/CF ratio of 4.74. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. CYD's current P/CF looks attractive when compared to its industry's average P/CF of 8.82. CYD's P/CF has been as high as 5.72 and as low as 2.16, with a median of 3.84, all within the past year.

These figures are just a handful of the metrics value investors tend to look at, but they help show that China Yuchai is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, CYD feels like a great value stock at the moment.

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

China Yuchai International Limited (CYD) - free report >>

Published in