New Horizon Health Limited (HKG:6606), is not the largest company out there, but it saw a decent share price growth of 14% on the SEHK over the last few months. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. 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. But what if there is still an opportunity to buy? Let's examine New Horizon Health's valuation and outlook in more detail to determine if there's still a bargain opportunity.
What Is New Horizon Health Worth?
New Horizon Health appears to be expensive according to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. We'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 65.77x is currently well-above the industry average of 14.2x, meaning that it is trading at a more expensive price relative to its peers. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Since New Horizon Health's share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will New Horizon Health generate?
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. New Horizon Health'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? It seems like the market has well and truly priced in 6606's positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe 6606 should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you've been keeping tabs on 6606 for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for 6606, which means it's worth diving deeper into other factors in order to take advantage of the next price drop.
If you want to dive deeper into New Horizon Health, you'd also look into what risks it is currently facing. At Simply Wall St, we found 1 warning sign for New Horizon Health and we think they deserve your attention.
If you are no longer interested in New Horizon Health, 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.