Have Investors Priced In Shenzhou International Group Holdings Limited’s (HKG:2313) Growth?

Shenzhou International Group Holdings Limited (HKG:2313) is considered a high growth stock. However its last closing price of HK$105.6 left investors wondering whether this growth has already been factored into the share price. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.

View our latest analysis for Shenzhou International Group Holdings

Exciting times ahead?

The excitement around Shenzhou International Group Holdings’s growth potential is not unfounded. Expectations from 22 analysts are extremely positive with earnings forecasted to rise significantly from today’s level of CN¥2.759 to CN¥4.488 over the next three years. This indicates an estimated earnings growth rate of 19% per year, on average, which illustrates a highly optimistic outlook in the near term.

Is 2313’s share price justifiable by its earnings growth?

2313 is trading at quite a high price-to-earnings (PE) ratio of 32.64x. This tells us that Shenzhou International Group Holdings is overvalued compared to the HK market average ratio of 10.92x , and overvalued based on current earnings compared to the Luxury industry average of 10.56x .

SEHK:2313 Price Estimation Relative to Market, March 21st 2019
SEHK:2313 Price Estimation Relative to Market, March 21st 2019

We already know that 2313 appears to be overvalued when compared to its industry average. But, to be able to properly assess the value of a high-growth stock such as Shenzhou International Group Holdings, we must incorporate its earnings growth in our valuation. The PEG ratio is a great calculation to take account of growth in the stock’s valuation. A PE ratio of 32.64x and expected year-on-year earnings growth of 19% give Shenzhou International Group Holdings a higher PEG ratio of 1.69x. Based on this growth, Shenzhou International Group Holdings’s stock can be considered a bit overvalued , based on fundamental analysis.

What this means for you:

2313’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:

  1. Financial Health: Are 2313’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has 2313 been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of 2313’s historicals for more clarity.
  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.