Is Now An Opportune Moment To Examine China Ruyi Holdings Limited (HKG:136)?

China Ruyi Holdings Limited (HKG:136), might not be a large cap stock, but it saw significant share price movement during recent months on the SEHK, rising to highs of HK$2.50 and falling to the lows of HK$1.27. 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 China Ruyi Holdings' current trading price of HK$1.27 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 China Ruyi Holdings’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 China Ruyi Holdings

Is China Ruyi 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. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 2.96x is currently trading slightly below its industry peers’ ratio of 7.89x, which means if you buy China Ruyi Holdings today, you’d be paying a reasonable price for it. And if you believe China Ruyi Holdings should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, China Ruyi Holdings’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

What does the future of China Ruyi Holdings 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 Ruyi Holdings, it is expected to deliver a highly negative earnings growth in the upcoming, 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? 136 seems priced close to industry peers right now, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on 136, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on 136 for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on 136 should the price fluctuate below the industry PE ratio.

If you want to dive deeper into China Ruyi Holdings, you'd also look into what risks it is currently facing. When we did our research, we found 4 warning signs for China Ruyi Holdings (2 shouldn't be ignored!) that we believe deserve your full attention.

If you are no longer interested in China Ruyi 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.