Is Now The Time To Look At Buying Edvantage Group Holdings Limited (HKG:382)?

Edvantage Group Holdings Limited (HKG:382), is not the largest company out there, but it received a lot of attention from a substantial price increase on the SEHK over the last few months. 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. But what if there is still an opportunity to buy? Let’s take a look at Edvantage Group Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Edvantage Group Holdings

Is Edvantage Group Holdings Still Cheap?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 Edvantage Group Holdings’s ratio of 5.61x is trading slightly below its industry peers’ ratio of 9.75x, which means if you buy Edvantage Group Holdings today, you’d be paying a reasonable price for it. And if you believe that Edvantage Group Holdings should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. So, is there another chance to buy low in the future? Given that Edvantage Group Holdings’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Edvantage Group Holdings look like?

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. Edvantage Group Holdings' earnings over the next few years are expected to increase by 34%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? 382’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at 382? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on 382, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 382, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Edvantage Group Holdings at this point in time. Every company has risks, and we've spotted 2 warning signs for Edvantage Group Holdings you should know about.

If you are no longer interested in Edvantage Group Holdings, 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.