Is It Too Late To Consider Buying Ever Sunshine Services Group Limited (HKG:1995)?

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. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at Ever Sunshine Services Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.

See our latest analysis for Ever Sunshine Services Group

Is Ever Sunshine Services Group Still Cheap?

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 7.36x is currently trading slightly below its industry peers’ ratio of 7.61x, which means if you buy Ever Sunshine Services Group today, you’d be paying a decent price for it. And if you believe Ever Sunshine Services Group 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. 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.

Can we expect growth from Ever Sunshine Services Group?

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. With profit expected to grow by 23% 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? 1995’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 1995? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on 1995, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 1995, 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.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. In terms of investment risks, we've identified 1 warning sign with Ever Sunshine Services Group, and understanding it should be part of your investment process.

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.