Should You Investigate New Horizon Health Limited (HKG:6606) At HK$18.38?

New Horizon Health Limited (HKG:6606), is not the largest company out there, but it received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$25.45 at one point, and dropping to the lows of HK$17.44. 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 New Horizon Health's current trading price of HK$18.38 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 New Horizon Health’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for New Horizon Health

What Is New Horizon Health Worth?

New Horizon Health appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that New Horizon Health’s ratio of 67.88x is above its peer average of 14.79x, which suggests the stock is trading at a higher price compared to the Healthcare industry. But, is there another opportunity to buy low in the future? Given that New Horizon Health’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 another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from New Horizon Health?

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. New Horizon Health'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 6606’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 6606 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 tabs on 6606 for some time, 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 6606, 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 New Horizon Health, you'd also look into what risks it is currently facing. For example, New Horizon Health has 2 warning signs (and 1 which is significant) we think you should know about.

If you are no longer interested in New Horizon Health, 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.