When Should You Buy S-Enjoy Service Group Co., Limited (HKG:1755)?

S-Enjoy Service Group Co., Limited (HKG:1755), might not be a large cap stock, but it received a lot of attention from a substantial price increase on the SEHK over the last few months. Shareholders may appreciate the recent price jump, but the company still has a way to go before reaching its yearly highs again. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s take a look at S-Enjoy Service Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Check out our latest analysis for S-Enjoy Service Group

What's The Opportunity In S-Enjoy Service Group?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’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 5.8x is currently trading slightly below its industry peers’ ratio of 7.02x, which means if you buy S-Enjoy Service Group today, you’d be paying a decent price for it. And if you believe that S-Enjoy Service Group should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. So, is there another chance to buy low in the future? Given that S-Enjoy Service Group’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 an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will S-Enjoy Service Group generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. S-Enjoy Service Group's earnings over the next few years are expected to increase by 36%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? 1755’s optimistic future growth appears to have been factored into the current share price, 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 1755? 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 an eye on 1755, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 1755, which means it’s worth further examining 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. At Simply Wall St, we found 1 warning sign for S-Enjoy Service Group and we think they deserve your attention.

If you are no longer interested in S-Enjoy Service 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.