Is Now The Time To Look At Buying China Maple Leaf Educational Systems Limited (HKG:1317)?

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China Maple Leaf Educational Systems Limited (HKG:1317), which is in the consumer services business, and is based in China, received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$4.87 at one point, and dropping to the lows of HK$2.94. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether China Maple Leaf Educational Systems’s current trading price of HK$3.09 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at China Maple Leaf Educational Systems’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for China Maple Leaf Educational Systems

What is China Maple Leaf Educational Systems worth?

The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 13.56x is currently trading slightly below its industry peers’ ratio of 15.8x, which means if you buy China Maple Leaf Educational Systems today, you’d be paying a reasonable price for it. And if you believe that China Maple Leaf Educational Systems should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that China Maple Leaf Educational Systems’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from China Maple Leaf Educational Systems?

SEHK:1317 Past and Future Earnings, June 29th 2019
SEHK:1317 Past and Future Earnings, June 29th 2019

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. China Maple Leaf Educational Systems’s earnings over the next few years are expected to increase by 41%, 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? 1317’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at 1317? Will you have enough conviction to buy should the price fluctuate below the true value?

Are you a potential investor? If you’ve been keeping tabs on 1317, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for 1317, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on China Maple Leaf Educational Systems. You can find everything you need to know about China Maple Leaf Educational Systems in the latest infographic research report. If you are no longer interested in China Maple Leaf Educational Systems, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

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.