Buy Country Garden Services Holdings Company Limited (HKG:6098) When Everyone Panics

Everyone is selling, the charts are red, but should you panic? Not at all. As a long term investor, my favorite time of the economic cycle is when great stocks sell at an unjustified discount. Today I want to bring to light the market’s darling – Country Garden Services Holdings Company Limited. Looking at its size, financial health and track record, I believe there’s an opportunity with Country Garden Services Holdings during these volatile times.

See our latest analysis for Country Garden Services Holdings

Country Garden Services Holdings Company Limited, an investment holding company, provides property management services to property owners, residents, and property developers in the People’s Republic of China. Established in 1992, and run by CEO Huiyan Yang, the company provides employment to 39.55k people and with the company’s market cap sitting at HK$60b, it falls under the mid-cap stocks category. Bear market volatility can have a short-term impact on large, well-established companies, but in the long-run, these businesses are likely to prevail. This is because fundamentally, nothing has changed. A fall in share price is hardly detrimental to its financial health and business operations. So, large-cap stocks are a safe bet to buy more of when the stock market is selling off.

SEHK:6098 Historical Debt, August 29th 2019
SEHK:6098 Historical Debt, August 29th 2019

With zero debt on its balance sheet, Country Garden Services Holdings isn’t constrained to debt obligations and covenants, which can be burdensome during financial downturns. Highly-levered companies have to maintain a cash cushion to meet near-term interest payments as well as meet unforeseen circumstances. With no lenders’ needs to tend to, Country Garden Services Holdings enjoys financial flexibility and independence – an invaluable position to be in during bear markets. Also with a current cash holding of CN¥6.2b, Country Garden Services Holdings’s cash position is within a healthy range and more than sufficient to cover other upcoming liabilities, which means 6098 is financially robust in the face of a volatile market.

SEHK:6098 Income Statement, August 29th 2019
SEHK:6098 Income Statement, August 29th 2019

6098’s annual earnings growth rate has been positive over the last five years, with an average rate of 42%, outperfoming the industry growth rate of 11%. It has also returned an ROE of 28% recently, above the industry return of 9.3%. Characteristics I value in a long term investment are proven in Country Garden Services Holdings, and I can continue to sleep easy at night with the stock as part of my portfolio.

Next Steps:

Whether you’re convinced or not, the key takeaway here is that every stock gets hit in a bear market, but not every stock deserves the blow. When prices are dropping like flies, now is the time to do your research and buy at a discount. Country Garden Services Holdings tick the boxes in terms of its scale, financial health and proven track record, but there are a few other things I have yet to consider. Below I’ve compiled a list of factors for you to continue your reading before you buy:
  1. Future Outlook: What are well-informed industry analysts predicting for 6098’s future growth? Take a look at our free research report of analyst consensus for 6098’s outlook.
  2. Valuation: What is 6098 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether 6098 is currently mispriced by the market.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.