China Distance Education Holdings Limited (NYSE:DL): Is Service Attractive Relative To NYSE Peers?
China Distance Education Holdings Limited (NYSE:DL), a US$297.59M small-cap, is a consumer services company operating in an 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 positive double-digit growth of 18.20% in the upcoming year . In this article, I’ll take you through the sector growth expectations, and also determine whether China Distance Education Holdings is a laggard or leader relative to its service sector peers. View our latest analysis for China Distance Education Holdings
What’s the catalyst for China Distance Education Holdings’s sector growth?
E-commerce remains a key driver of growth for consumer services, which enables service companies to grow share and reduce cost to serve. A crucial strategy for incumbents is to be well-positioned in response to the growing importance of pure e-commerce players, as well as building up their own capabilities around e-commerce. In the past year, the industry delivered growth in the twenties, beating the US market growth of 9.79%. China Distance Education Holdings lags the pack with its negative growth rate of -40.94% over the past year, which indicates the company will be growing at a slower pace than its consumer services peers. As the company trails the rest of the industry in terms of growth, China Distance Education Holdings may also be a cheaper stock relative to its peers.
Is China Distance Education Holdings and the sector relatively cheap?
Consumer services companies are typically trading at a PE of 23.04x, in-line with the US stock market PE of 18.76x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 10.69% on equities compared to the market’s 10.47%. On the stock-level, China Distance Education Holdings is trading at a PE ratio of 19.73x, which is relatively in-line with the average consumer services stock. In terms of returns, China Distance Education Holdings generated 25.17% in the past year, which is 14.48% over the consumer services sector.
Next Steps:
China Distance Education Holdings has been a consumer services industry laggard in the past year. It delivered lower earnings growth compared to its peers in the near term, and it is also trading at a PE in-line with these companies. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the services sector. However, before you make a decision on the stock, I suggest you look at China Distance 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 DL’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 China Distance 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 pass 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.
