Why Crazy Sports Group Limited (HKG:82) Could Be Worth Watching

While Crazy Sports Group Limited (HKG:82) might not be the most widely known stock at the moment, it saw a significant share price rise of over 20% in the past couple of months on the SEHK. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Today I will analyse the most recent data on Crazy Sports Group’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for Crazy Sports Group

What's the opportunity in Crazy Sports Group?

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 17.2x is currently trading slightly above its industry peers’ ratio of 13x, which means if you buy Crazy Sports Group today, you’d be paying a relatively sensible price for it. And if you believe that Crazy Sports Group should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. Furthermore, it seems like Crazy Sports Group’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Crazy Sports Group 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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Crazy Sports Group'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 already priced in 82’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at 82? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on 82, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 82, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. In terms of investment risks, we've identified 1 warning sign with Crazy Sports Group, and understanding it should be part of your investment process.

If you are no longer interested in Crazy Sports Group, 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.