Should You Investigate Pou Sheng International (Holdings) Limited (HKG:3813) At HK$1.84?

Pou Sheng International (Holdings) Limited (HKG:3813), might not be a large cap stock, but it saw significant share price movement during recent months on the SEHK, rising to highs of HK$2.04 and falling to the lows of HK$1.70. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Pou Sheng International (Holdings)'s current trading price of HK$1.84 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Pou Sheng International (Holdings)’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Pou Sheng International (Holdings)

What is Pou Sheng International (Holdings) worth?

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. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Pou Sheng International (Holdings)’s ratio of 19.28x is trading slightly above its industry peers’ ratio of 14.67x, which means if you buy Pou Sheng International (Holdings) today, you’d be paying a relatively reasonable price for it. And if you believe Pou Sheng International (Holdings) should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Furthermore, Pou Sheng International (Holdings)’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

Can we expect growth from Pou Sheng International (Holdings)?

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. Pou Sheng International (Holdings)'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? 3813’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 3813? 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 an eye on 3813, 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 3813, 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.

If you want to dive deeper into Pou Sheng International (Holdings), you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for Pou Sheng International (Holdings) and we think they deserve your attention.

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This article by Simply Wall St is general in nature. 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.
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