Why Investors Should Run Towards Greentown Service Group Co. Ltd. (HKG:2869)

Greentown Service Group Co. Ltd. is a financially healthy and robust stock with a proven track record of outperformance. We all know Greentown Service Group, and having this large-cap to cushion your portfolio during a volatile period in the stock market isn’t a bad idea. Today I will give a high-level overview of the stock, and why I believe it’s still attractive.

Check out our latest analysis for Greentown Service Group

Greentown Service Group Co. Ltd. provides residential property management services in the People’s Republic of China. Founded in 1998, and run by CEO Zhihua Wu, the company now has 22.74k employees and with the company’s market cap sitting at HK$17b, it falls under the mid-cap stocks category. Volatility in the market is hardly detrimental to the financial health and business operations of a large, well-established company. Although some monetary and fiscal policy changes may impact some corporate financing decisions and strategy, what we’ve learnt over time is that these companies tend to adapt. And having a strong balance sheet and a history of proven success aids in this adaptability.

SEHK:2869 Historical Debt January 1st 19
SEHK:2869 Historical Debt January 1st 19

Having high levels of debt can put pressure on companies during downturns since they have to continuously service their debt payments and interest costs. This means they need to maintain enough cash-on-hand for these expenses as well as maintain a cash cushion for unforeseen circumstances, which can get costly. In Greentown Service Group’s case, they have no debt on the books, which eliminates short-term debt pressures highly-levered companies may face. Also with a current cash holding of CN¥1.8b, Greentown Service Group’s cash position is within a healthy range and more than sufficient to cover other upcoming liabilities, which means 2869 is financially robust in the face of a volatile market.

SEHK:2869 Income Statement Export January 1st 19
SEHK:2869 Income Statement Export January 1st 19

2869’s profit growth over the previous five years has been positive, with an average annual rate of 29%, outpacing the industry growth rate of 11%. It has also returned an ROE of 21% recently, above the industry return of 11%. Greentown Service Group’s strong performance over time is a demonstration of its ability to grow through cycles, raising my confidence in the company as a long-term investment.

Next Steps:

Greentown Service Group makes for a robust long-term investment based on its scale, financial health and track record. Remember, in bear markets, sell-offs can be unjustified. Ask yourself, has anything really changed with Greentown Service Group? If not, then why not scoop it up at a discount? Lining your portfolio with a few well-established companies can reduce your risk and help you scale your wealth in the long run. One thing you should remember though, is to do your homework. Do your own research, come up with your point of view. Below is a list I’ve put together of other things you should consider before you buy:
  1. Future Outlook: What are well-informed industry analysts predicting for 2869’s future growth? Take a look at our free research report of analyst consensus for 2869’s outlook.
  2. Valuation: What is 2869 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 2869 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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.