Is Ever Sunshine Services Group Limited (HKG:1995) Potentially Undervalued?

Ever Sunshine Services Group Limited (HKG:1995), is not the largest company out there, but it received a lot of attention from a substantial price increase on the SEHK over the last few months. While good news for shareholders, the company has traded much higher in the past year. 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, could the stock still be trading at a relatively cheap price? Let’s examine Ever Sunshine Services Group’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Ever Sunshine Services Group

What's The Opportunity In Ever Sunshine Services Group?

According to our valuation model, Ever Sunshine Services Group seems to be fairly priced at around 13% below our intrinsic value, which means if you buy Ever Sunshine Services Group today, you’d be paying a fair price for it. And if you believe the company’s true value is HK$1.73, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Ever Sunshine Services Group’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Ever Sunshine Services Group generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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. With profit expected to grow by 32% over the next couple of years, the future seems bright for Ever Sunshine Services Group. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in 1995’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping an eye on 1995, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, 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 while earnings quality is important, it's equally important to consider the risks facing Ever Sunshine Services Group at this point in time. You'd be interested to know, that we found 1 warning sign for Ever Sunshine Services Group and you'll want to know about it.

If you are no longer interested in Ever Sunshine Services 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.