Many Still Looking Away From Crazy Sports Group Limited (HKG:82)

There wouldn't be many who think Crazy Sports Group Limited's (HKG:82) price-to-earnings (or "P/E") ratio of 6.3x is worth a mention when the median P/E in Hong Kong is similar at about 8x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Crazy Sports Group has been doing quite well of late. One possibility is that the P/E is moderate because investors think the company's earnings will be less resilient moving forward. If not, then existing shareholders have reason to be feeling optimistic about the future direction of the share price.

Our analysis indicates that 82 is potentially undervalued!

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Crazy Sports Group.

How Is Crazy Sports Group's Growth Trending?

In order to justify its P/E ratio, Crazy Sports Group would need to produce growth that's similar to the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 37% last year. Still, EPS has barely risen at all from three years ago in total, which is not ideal. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 39% per annum during the coming three years according to the sole analyst following the company. That's shaping up to be materially higher than the 14% per annum growth forecast for the broader market.

With this information, we find it interesting that Crazy Sports Group is trading at a fairly similar P/E to the market. It may be that most investors aren't convinced the company can achieve future growth expectations.

The Final Word

We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Crazy Sports Group currently trades on a lower than expected P/E since its forecast growth is higher than the wider market. There could be some unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Crazy Sports Group that you should be aware of.

If these risks are making you reconsider your opinion on Crazy Sports Group, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.