Is There Now An Opportunity In EC Healthcare (HKG:2138)?

EC Healthcare (HKG:2138), 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. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at EC Healthcare’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View 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 50.91x is above its peer average of 9.75x, which suggests the stock is trading at a higher price compared to the Consumer Services industry. If you like the stock, you may want to keep an eye out for a potential price decline 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.

Can we expect growth from EC Healthcare?

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. 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.

If you'd like to know more about EC Healthcare as a business, it's important to be aware of any risks it's facing. While conducting our analysis, we found that EC Healthcare has 1 warning sign and it would be unwise to ignore this.

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.