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Is Bright Scholar Education Holdings Limited (NYSE:BEDU) An Industry Laggard Or Leader?

Bright Scholar Education Holdings Limited (NYSE:BEDU), a US$1.53b small-cap, operates in the consumer services industry, whose activities are primarily project-based work with individual clients, which depends on the general sentiment of the economy. Consumer services analysts are forecasting for the entire industry, a highly optimistic growth of 30.9% in the upcoming year , and a massive triple-digit earnings growth over the next couple of years. Not surprisingly, this rate is more than double the growth rate of the US stock market as a whole. Below, I will examine the sector growth prospects, as well as evaluate whether Bright Scholar Education Holdings is lagging or leading in the industry.

View our latest analysis for Bright Scholar Education Holdings

What’s the catalyst for Bright Scholar Education Holdings’s sector growth?

NYSE:BEDU Past Future Earnings September 4th 18
NYSE:BEDU Past Future Earnings September 4th 18

A crucial strategy for incumbents is to be well-positioned in response to the growing importance of building up their own capabilities around e-commerce. In the previous year, the industry saw growth in the thirties, beating the US market growth of 15.3%. Bright Scholar Education Holdings leads the pack with its impressive earnings growth of 39.8% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with Bright Scholar Education Holdings poised to deliver a 57.0% growth over the next couple of years compared to the industry’s 30.9%. This growth may make Bright Scholar Education Holdings a more expensive stock relative to its peers.

Is Bright Scholar Education Holdings and the sector relatively cheap?

NYSE:BEDU PE PEG Gauge September 4th 18
NYSE:BEDU PE PEG Gauge September 4th 18

The consumer services industry is trading at a PE ratio of 24.86x, above the broader US stock market PE of 19.86x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry returned a similar 12.5% on equities compared to the market’s 10.6%. On the stock-level, Bright Scholar Education Holdings is trading at a higher PE ratio of 42.39x, making it more expensive than the average consumer services stock. In terms of returns, Bright Scholar Education Holdings generated 8.2% in the past year, which is 4.3% below the consumer services sector.

Next Steps:

Bright Scholar Education Holdings’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this higher growth prospect is also reflected in the company’s price, suggested by its higher PE ratio relative to its peers. If Bright Scholar Education Holdings has been on your watchlist for a while, now may not be the best time to enter into the stock since it is trading at a higher valuation compared to other consumer services companies. However, before you make a decision on the stock, I suggest you look at Bright Scholar Education Holdings’s fundamentals in order to build a holistic investment thesis.

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.

  2. Historical Track Record: What has BEDU’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Bright Scholar Education Holdings? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

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