Is Zijin Mining Group Company Limited (HKG:2899) Undervalued After Accounting For Its Future Growth?

Zijin Mining Group Company Limited (HKG:2899) closed yesterday at HK$3.22, which left some investors asking whether the high earnings potential can still be justified at this price. Below I will be talking through a basic metric which will help answer this question.

Check out our latest analysis for Zijin Mining Group

What can we expect from Zijin Mining Group in the future?

Investors in Zijin Mining Group have been patiently waiting for the uptick in earnings. If you believe the analysts covering the stock then the following year will be very interesting. Expectations from 16 analysts are buoyant with earnings per share estimated to rise from today's level of CN¥0.178 to CN¥0.269 over the next three years. On average, this leads to a growth rate of 13% each year, which signals a market-beating outlook in the upcoming years.

Can 2899's share price be justified by its earnings growth?

Zijin Mining Group is available at a price-to-earnings ratio of 15.57x, showing us it is overvalued compared to the HK market average ratio of 11.88x , and overvalued based on current earnings compared to the Metals and Mining industry average of 8.59x .

We already know that 2899 appears to be overvalued when compared to its industry average. But, since Zijin Mining Group is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 15.57x and expected year-on-year earnings growth of 13% give Zijin Mining Group an acceptable PEG ratio of 1.16x. Based on this growth, Zijin Mining Group's stock can be considered slightly overvalued , based on the fundamentals.

What this means for you:

2899's current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you're a potential investor, now may not 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 highly recommend you to complete your research by taking a look at the following:

1. Financial Health: Are 2899’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. Past Track Record: Has 2899 been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of 2899's historicals for more clarity.
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.

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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.