While Fosun Tourism Group (HKG:1992) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the SEHK, rising to highs of HK$9.06 and falling to the lows of HK$7.09. 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 Fosun Tourism Group's current trading price of HK$7.49 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 Fosun Tourism Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What Is Fosun Tourism Group Worth?
Fosun Tourism 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 Fosun Tourism Group’s ratio of 70.41x is above its peer average of 17.66x, which suggests the stock is trading at a higher price compared to the Hospitality industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Fosun Tourism Group’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Fosun Tourism 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. Fosun Tourism 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 1992’s positive outlook, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe 1992 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 an eye on 1992 for a while, 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 positive outlook is encouraging for 1992, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you want to dive deeper into Fosun Tourism Group, you'd also look into what risks it is currently facing. For example, Fosun Tourism Group has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.
If you are no longer interested in Fosun Tourism 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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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.