Is China Isotope & Radiation Corporation’s (HKG:1763) Future Growth Already Accounted For In Today’s Price?

China Isotope & Radiation Corporation (HKG:1763) is considered a high-growth stock, but its last closing price of HK$18.5 left some investors wondering if this high future earnings potential can be rationalized by its current price tag. Below I will be talking through a basic metric which will help answer this question.

Check out our latest analysis for China Isotope & Radiation

Exciting times ahead?

China Isotope & Radiation’s growth potential is very attractive. Expectations from 2 analysts are extremely bullish with earnings forecasted to rise significantly from today’s level of CN¥1.157 to CN¥1.899 over the next three years. This indicates an estimated earnings growth rate of 17% per year, on average, which illustrates a highly optimistic outlook in the near term.

Is 1763 available at a good price after accounting for its growth?

China Isotope & Radiation is trading at quite low price-to-earnings (PE) ratio of 14.09x. This tells us the stock is overvalued compared to the HK market average ratio of 10.63x , and undervalued based on its latest annual earnings update compared to the Medical Equipment average of 15.06x .

SEHK:1763 Price Estimation Relative to Market, July 24th 2019
SEHK:1763 Price Estimation Relative to Market, July 24th 2019

China Isotope & Radiation’s price-to-earnings ratio stands at 14.09x, which is low, relative to the industry average. This already suggests that the stock could be undervalued. However, since China Isotope & Radiation is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 14.09x and expected year-on-year earnings growth of 17% give China Isotope & Radiation a low PEG ratio of 0.84x. This tells us that when we include its growth in our analysis China Isotope & Radiation’s stock can be considered fairly valued , based on the fundamentals.

What this means for you:

1763’s current undervaluation could signal a potential buying opportunity to increase your exposure to the stock, or it you’re a potential investor, now may be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:

  1. Financial Health: Are 1763’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Valuation: What is 1763 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether 1763 is currently mispriced by the market.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.