Should You Think About Buying GreenTree Hospitality Group Ltd. (NYSE:GHG) Now?

While GreenTree Hospitality Group Ltd. (NYSE:GHG) might not be the most widely known stock at the moment, it saw a decent share price growth in the teens level on the NYSE over the last few months. 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 GreenTree Hospitality 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 GreenTree Hospitality Group

What is GreenTree Hospitality Group worth?

Great news for investors – GreenTree Hospitality Group is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. 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 14.11x is currently well-below the industry average of 22.61x, meaning that it is trading at a cheaper price relative to its peers. Another thing to keep in mind is that GreenTree Hospitality Group’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What does the future of GreenTree Hospitality Group look like?

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 79% over the next couple of years, the future seems bright for GreenTree Hospitality 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? Since GHG is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. With an optimistic profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on GHG for a while, now might be the time to make a leap. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy GHG. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed assessment.

If you'd like to know more about GreenTree Hospitality Group as a business, it's important to be aware of any risks it's facing. To that end, you should learn about the 3 warning signs we've spotted with GreenTree Hospitality Group (including 1 which is a bit concerning).

If you are no longer interested in GreenTree Hospitality Group, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.