Should You Investigate Texhong Textile Group Limited (HKG:2678) At HK$10.64?

By
Simply Wall St
Published
January 13, 2022
SEHK:2678
Source: Shutterstock

While Texhong Textile Group Limited (HKG:2678) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the SEHK over the last few months. 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, what if the stock is still a bargain? Let’s examine Texhong Textile Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Texhong Textile Group

Is Texhong Textile Group still cheap?

Good news, investors! Texhong Textile Group is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio 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 Texhong Textile Group’s ratio of 4.44x is below its peer average of 9.83x, which indicates the stock is trading at a lower price compared to the Luxury industry. Although, there may be another chance to buy again in the future. This is because Texhong Textile Group’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Texhong Textile Group?

earnings-and-revenue-growth
SEHK:2678 Earnings and Revenue Growth January 13th 2022

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Texhong Textile Group's earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? Since 2678 is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on 2678 for a while, now might be the time to enter the stock. Its prosperous future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy 2678. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

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

If you are no longer interested in Texhong Textile 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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