Is It Time To Consider Buying Xueda (Xiamen) Education Technology Group Co., Ltd (SZSE:000526)?

Xueda (Xiamen) Education Technology Group Co., Ltd (SZSE:000526), is not the largest company out there, but it saw a decent share price growth of 11% on the SZSE over the last few months. While good news for shareholders, the company has traded much higher in the past year. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on Xueda (Xiamen) Education Technology Group’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Xueda (Xiamen) Education Technology Group

What's The Opportunity In Xueda (Xiamen) Education Technology Group?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 37x is currently trading slightly above its industry peers’ ratio of 36.16x, which means if you buy Xueda (Xiamen) Education Technology Group today, you’d be paying a relatively reasonable price for it. And if you believe that Xueda (Xiamen) Education Technology Group should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. In addition to this, it seems like Xueda (Xiamen) Education Technology Group’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.

Can we expect growth from Xueda (Xiamen) Education Technology Group?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 83% over the next couple of years, the future seems bright for Xueda (Xiamen) Education Technology Group. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in 000526’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at 000526? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on 000526, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 000526, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. While conducting our analysis, we found that Xueda (Xiamen) Education Technology Group has 1 warning sign and it would be unwise to ignore it.

If you are no longer interested in Xueda (Xiamen) Education Technology Group, 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.