Is Now An Opportune Moment To Examine Minsheng Education Group Company Limited (HKG:1569)?

Minsheng Education Group Company Limited (HKG:1569), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the SEHK. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Minsheng Education Group’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Minsheng Education Group

Is Minsheng Education Group still cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare 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 Minsheng Education Group’s ratio of 16.29x is trading slightly below its industry peers’ ratio of 18x, which means if you buy Minsheng Education Group today, you’d be paying a reasonable price for it. And if you believe that Minsheng Education Group should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, Minsheng Education Group’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

Can we expect growth from Minsheng Education Group?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. With profit expected to grow by 60% over the next couple of years, the future seems bright for Minsheng Education Group. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? 1569’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at 1569? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on 1569, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 1569, 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.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. You'd be interested to know, that we found 2 warning signs for Minsheng Education Group and you'll want to know about these.

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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. 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.
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