Is China Maple Leaf Educational Systems Limited (HKG:1317) Undervalued After Accounting For Its Future Growth?

Growth expectations for China Maple Leaf Educational Systems Limited (HKG:1317) are high, but many investors are starting to ask whether its last close at HK$3.06 can still be rationalized by the future potential. Let’s take a look at some key metrics to determine whether there’s any value here for current and potential future investors.

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See our latest analysis for China Maple Leaf Educational Systems

Can we expect 1317 to keep growing?

China Maple Leaf Educational Systems’s growth potential is very attractive. Expectations from 19 analysts are extremely bullish with earnings per share estimated to surge from current levels of CN¥0.201 to CN¥0.313 over the next three years. This indicates an estimated earnings growth rate of 19% per year, on average, which indicates an exceedlingly positive future in the near term.

Is 1317’s share price justifiable by its earnings growth?

China Maple Leaf Educational Systems is available at a price-to-earnings ratio of 13.44x, showing us it is overvalued compared to the HK market average ratio of 11.06x , and undervalued based on its latest annual earnings update compared to the Consumer Services average of 15.74x .

SEHK:1317 Price Estimation Relative to Market, May 22nd 2019
SEHK:1317 Price Estimation Relative to Market, May 22nd 2019

China Maple Leaf Educational Systems’s price-to-earnings ratio stands at 13.44x, which is low, relative to the industry average. This already suggests that the stock could be undervalued. However, since China Maple Leaf Educational Systems is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 13.44x and expected year-on-year earnings growth of 19% give China Maple Leaf Educational Systems a very low PEG ratio of 0.72x. This tells us that when we include its growth in our analysis China Maple Leaf Educational Systems’s stock can be considered relatively cheap , based on fundamental analysis.

What this means for you:

1317’s current undervaluation could signal a potential buying opportunity to increase your exposure to the stock, or it you’re a potential investor, now may 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 urge you to complete your research by taking a look at the following:

  1. Financial Health: Are 1317’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 1317 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 1317’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.