Is Now The Time To Look At Buying Xtep International Holdings Limited (HKG:1368)?

Xtep International Holdings Limited (HKG:1368), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the SEHK. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine Xtep International Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out the opportunities and risks within the HK Luxury industry.

Is Xtep International Holdings Still Cheap?

Xtep International Holdings is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Xtep International Holdings’s ratio of 18.82x is above its peer average of 8.44x, which suggests the stock is trading at a higher price compared to the Luxury industry. But, is there another opportunity to buy low in the future? Since Xtep International Holdings’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of Xtep International Holdings look like?

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. Xtep International Holdings' earnings over the next few years are expected to increase by 40%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? 1368’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe 1368 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on 1368 for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for 1368, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Xtep International Holdings, you'd also look into what risks it is currently facing. While conducting our analysis, we found that Xtep International Holdings has 1 warning sign and it would be unwise to ignore it.

If you are no longer interested in Xtep International Holdings, 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.