Is It Too Late To Consider Buying Hope Education Group Co., Ltd. (HKG:1765)?

Hope Education Group Co., Ltd. (HKG:1765), might not be a large cap stock, but it saw significant share price movement during recent months on the SEHK, rising to highs of HK$2.24 and falling to the lows of HK$1.20. 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 Hope Education Group's current trading price of HK$1.20 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 Hope Education Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Hope Education Group

What's the opportunity in Hope Education Group?

Hope Education Group is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison 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 Hope Education Group’s ratio of 24.5x is above its peer average of 15.12x, which suggests the stock is trading at a higher price compared to the Consumer Services industry. In addition to this, it seems like Hope Education Group’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Hope Education Group generate?

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. Hope Education Group's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in 1765’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe 1765 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on 1765 for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for 1765, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about Hope Education Group as a business, it's important to be aware of any risks it's facing. For instance, we've identified 4 warning signs for Hope Education Group (1 is significant) you should be familiar with.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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