At HK$34.80, Is Zhongsheng Group Holdings Limited (HKG:881) Worth Looking At Closely?

Let's talk about the popular Zhongsheng Group Holdings Limited (HKG:881). The company's shares saw significant share price movement during recent months on the SEHK, rising to highs of HK$44.65 and falling to the lows of HK$32.20. 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 Zhongsheng Group Holdings' current trading price of HK$34.80 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Zhongsheng Group Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Zhongsheng Group Holdings

Is Zhongsheng Group Holdings Still Cheap?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. 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 11.09x is currently trading slightly below its industry peers’ ratio of 13.19x, which means if you buy Zhongsheng Group Holdings today, you’d be paying a reasonable price for it. And if you believe that Zhongsheng Group Holdings 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. Furthermore, it seems like Zhongsheng Group Holdings’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.

Can we expect growth from Zhongsheng Group Holdings?

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. 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. Zhongsheng Group Holdings' earnings over the next few years are expected to increase by 58%, 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? It seems like the market has already priced in 881’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 881? 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 881, 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 881, 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.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Zhongsheng Group Holdings.

If you are no longer interested in Zhongsheng Group Holdings, 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.