Should You Think About Buying Xiabuxiabu Catering Management (China) Holdings Co., Ltd. (HKG:520) Now?

While Xiabuxiabu Catering Management (China) Holdings Co., Ltd. (HKG:520) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine Xiabuxiabu Catering Management (China) Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Xiabuxiabu Catering Management (China) Holdings

Is Xiabuxiabu Catering Management (China) Holdings still cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio 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 Xiabuxiabu Catering Management (China) Holdings’s ratio of 22.49x is trading slightly above its industry peers’ ratio of 20.55x, which means if you buy Xiabuxiabu Catering Management (China) Holdings today, you’d be paying a relatively sensible price for it. And if you believe that Xiabuxiabu Catering Management (China) Holdings should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Is there another opportunity to buy low in the future? Since Xiabuxiabu Catering Management (China) Holdings’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. 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 kind of growth will Xiabuxiabu Catering Management (China) Holdings generate?

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 Xiabuxiabu Catering Management (China) Holdings. 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 already priced in 520’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at 520? 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 an eye on 520, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 520, 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.

It can be quite valuable to consider what analysts expect for Xiabuxiabu Catering Management (China) Holdings from their most recent forecasts. At Simply Wall St, we have the analysts estimates which you can view by clicking here.

If you are no longer interested in Xiabuxiabu Catering Management (China) 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.