At HK$1.31, Is China YuHua Education Corporation Limited (HKG:6169) Worth Looking At Closely?

China YuHua Education Corporation Limited (HKG:6169), might not be a large cap stock, 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? Today I will analyse the most recent data on China YuHua Education’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for China YuHua Education

What's The Opportunity In China YuHua Education?

Great news for investors – China YuHua Education is still trading at a fairly cheap price 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 China YuHua Education’s ratio of 3.7x is below its peer average of 9.54x, which indicates the stock is trading at a lower price compared to the Consumer Services industry. Another thing to keep in mind is that China YuHua Education’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What does the future of China YuHua Education 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. Though in the case of China YuHua Education, it is expected to deliver a negative earnings growth of -3.3%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Although 6169 is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to 6169, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on 6169 for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you'd like to know more about China YuHua Education as a business, it's important to be aware of any risks it's facing. For example, China YuHua Education has 3 warning signs (and 2 which shouldn't be ignored) we think you should know about.

If you are no longer interested in China YuHua Education, 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.