E-House (China) Enterprise Holdings Limited (HKG:2048) closed yesterday at HK$12.32, which left some investors asking whether the high earnings potential can still be justified at this price.
Let’s look into this by assessing 2048’s expected growth over the next few years.
What can we expect from 2048 in the future?
E-House (China) Enterprise Holdings is poised for significantly high earnings growth in the near future.
The consensus forecast from 3 analysts is
with earnings forecasted to rise significantly from today’s level of
CN¥0.969 to CN¥1.805 over the next three years.
This results in an annual growth rate of 47%, on average,
which illustrates a highly optimistic outlook in the near term.
Is 2048’s share price justified by its earnings growth?
E-House (China) Enterprise Holdings is available at a price-to-earnings ratio of 10.86x, showing us it is
overvalued compared to the HK market average ratio of 10.84x
overvalued based on current earnings compared to the Real Estate industry average of 6.06x
We understand 2048 seems to be overvalued based on its current earnings, compared to its industry peers.
to be able to properly assess the value of a high-growth stock such as E-House (China) Enterprise Holdings, we must incorporate its earnings growth in our valuation. The PEG ratio is a great calculation to take account of growth in the stock’s valuation.
A PE ratio of 10.86x and expected year-on-year earnings growth of 47% give E-House (China) Enterprise Holdings
an extremely low
PEG ratio of 0.23x.
So, when we include the growth factor in our analysis, E-House (China) Enterprise Holdings appears
, based on the fundamentals.
What this means for you:
2048’s current undervaluation could signal a potential buying opportunity to increase your exposure to the stock, or it you’re a potential investor, now may be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional.
If you have not done so already, I
you to complete your research by taking a look at the following:
- Financial Health: Are 2048’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Valuation: What is 2048 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether 2048 is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
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