China Greenland Broad Greenstate Group Company Limited (SEHK:1253), a HKDHK$3.98B small-cap, is a commercial services company operating in an industry, whose performance is linked to business conditions and the general economy, as it draws revenue from industries across different sectors. Companies in the industry are faced with building their strategies around the evolving conditions and the potential for further consolidation by focusing resources on increasing market share by growing channels. Commercial services analysts are forecasting for the entire industry, a strong double-digit growth of 15.14% in the upcoming year , and a strong near-term growth of 19.38% over the next couple of years. However, this rate came in below the growth rate of the Hong Kong stock market as a whole. Is now the right time to pick up some shares in commercial services companies? Below, I will examine the sector growth prospects, and also determine whether China Greenland Broad Greenstate Group is a laggard or leader relative to its service sector peers. Check out our latest analysis for China Greenland Broad Greenstate Group
What’s the catalyst for China Greenland Broad Greenstate Group's sector growth?
E-commerce remains a later driver of growth for commercial services, which enables service companies to grow share and reduce cost to serve. More than ever, it is crucial for the incumbents to position itself to respond to the growing relevance of stock-less independent dealers, further service pure e-commerce players and also build on their own e-commerce capabilities. Over the past year, the industry saw growth of 1.00%, though still underperforming the wider Hong Kong stock market. China Greenland Broad Greenstate Group leads the pack with its impressive earnings growth of 9.74% over the past year. This proven growth may make China Greenland Broad Greenstate Group a more expensive stock relative to its peers.
Is China Greenland Broad Greenstate Group and the sector relatively cheap?
The commercial services sector's PE is currently hovering around 19x, in-line with the Hong Kong stock market PE of 14x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a higher 13.47% compared to the market’s 10.09%, potentially illustrative of past tailwinds. On the stock-level, China Greenland Broad Greenstate Group is trading at a PE ratio of 19x, which is relatively in-line with the average commercial services stock. In terms of returns, China Greenland Broad Greenstate Group generated 23.96% in the past year, which is 10.50% over the commercial services sector.
What this means for you:
Are you a shareholder? China Greenland Broad Greenstate Group recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders, and the stock is currently trading in-line with its peers. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto China Greenland Broad Greenstate Group as part of your portfolio. However, if you’re relatively concentrated in commercial services, you may want to value China Greenland Broad Greenstate Group based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If China Greenland Broad Greenstate Group has been on your watchlist for a while, now may be the time to enter into the stock. If you like its proven ability to generate growth, you’ll be paying a fair value for the company, given that it is trading relatively in-line with its peers. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time. Before you make a decision on the stock, I suggest you take a look at other important fundamentals such as the company’s financial health in order to build a holistic investment thesis.
For a deeper dive into China Greenland Broad Greenstate Group's stock, take a look at the company's latest free analysis report to find out more on its financial health and other fundamentals. Interested in other service stocks instead? Use our free playform to see my list of over 100 other service companies trading on the market.