Should You Investigate EC Healthcare (HKG:2138) At HK$11.10?

EC Healthcare (HKG:2138), is not the largest company out there, but it saw significant share price movement during recent months on the SEHK, rising to highs of HK$12.32 and falling to the lows of HK$10.10. 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$11.10 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's the opportunity in EC Healthcare?

According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 67.75x is currently well-above the industry average of 21.19x, meaning that it is trading at a more expensive price relative to its peers. 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. 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. EC Healthcare'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 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 an eye on 2138 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 2138, 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 EC Healthcare, you'd also look into what risks it is currently facing. In terms of investment risks, we've identified 3 warning signs with EC Healthcare, and understanding these should be part of your investment process.

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.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.