A Look at China Education Group Holdings (SEHK:839) Valuation Following Strong Full-Year Earnings Growth
China Education Group Holdings (SEHK:839) just released its full-year earnings, highlighting a jump in both revenue and net income compared to last year. Investors are watching closely as these numbers reflect meaningful growth for the company.
See our latest analysis for China Education Group Holdings.
China Education Group Holdings’ latest results seem to have given investors a lift, with the share price up nearly 5% over the past week. That said, momentum remains uneven. While short-term moves are positive, the one-year total shareholder return sits at -16% and the five-year track record reflects a steep decline of 76%. Recent earnings growth could help shift sentiment if the company continues to deliver, but the market is still gauging whether this rebound will stick.
If you’re seeking other investment stories with strong potential, it’s an ideal time to broaden your search and discover fast growing stocks with high insider ownership
With shares still far below their five-year highs and recent earnings showing marked improvement, does China Education Group Holdings now offer a compelling entry point, or is the market already factoring in a turnaround?
China Education Group Holdings currently trades at a price-to-earnings (P/E) ratio of 7.3x, which is nearly 60% lower than our estimate of its fair value. With its most recent close at HK$2.8, the stock appears undervalued both by direct sector comparison and absolute benchmarks.
The price-to-earnings ratio reflects how much investors are willing to pay for each dollar of earnings. For a private education operator like China Education Group Holdings, it is a useful gauge of market expectations around profitability and sector growth.
At 7.3x, the P/E ratio matches the Hong Kong Consumer Services industry average but is significantly lower than the peer group average of 16.7x. According to our regression-based fair ratio, a move toward a higher multiple is possible if current earnings growth continues or accelerates. This suggests the market may be underpricing the company’s future earnings potential given its recent performance turnaround.
Explore the SWS fair ratio for China Education Group Holdings
Result: Price-to-Earnings of 7.3x (UNDERVALUED)
However, persistent share price volatility and lackluster long-term returns still pose risks that may challenge the sustainability of this recent positive momentum.
Find out about the key risks to this China Education Group Holdings narrative.
Taking a step back from earnings multiples, our SWS DCF model estimates China Education Group Holdings’ fair value at HK$6.83 per share, which is significantly higher than the current HK$2.8 price. This suggests a deeper discount than what the P/E ratio indicates. However, it is important to consider how much confidence investors should place in these long-range forecasts.
