At HK$3.13, Is EC Healthcare (HKG:2138) Worth Looking At Closely?

EC Healthcare (HKG:2138), is not the largest company out there, but it received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$5.04 at one point, and dropping to the lows of HK$3.13. 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 EC Healthcare's current trading price of HK$3.13 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 EC Healthcare’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 EC Healthcare

What Is EC Healthcare Worth?

EC Healthcare 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 EC Healthcare’s ratio of 53.26x is above its peer average of 7.8x, which suggests the stock is trading at a higher price compared to the Consumer Services industry. But, is there another opportunity to buy low in the future? Since EC Healthcare’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of EC Healthcare look like?

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 more than double over the next couple of years, the future seems bright for EC Healthcare. 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? It seems like the market has well and truly priced in 2138’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 2138 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 2138 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 positive outlook is encouraging for 2138, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Case in point: We've spotted 3 warning signs for EC Healthcare you should be aware of.

If you are no longer interested in EC Healthcare, 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.