Golden Eagle Retail Group Limited (HKG:3308), a HK$14.02b small-cap, operates in the retail industry impacted by the digital transformation for all retail channels. Growth has been a result of investment in streamlining distribution and improving website platforms to accommodate the shift in spending. Retail analysts are forecasting for the entire industry, a positive double-digit growth of 23.1% in the upcoming year , and a low 1.6% growth over the next couple of years. This rate is below the growth rate of the Hong Kong stock market as a whole. Today, I will analyse the industry outlook, and also determine whether Golden Eagle Retail Group is a laggard or leader relative to its retail peers.
What’s the catalyst for Golden Eagle Retail Group’s sector growth?
E-retailing is expected to remain the fastest growing sales channel, shifting the retail landscape. Significant number of retail store closures and bankruptcies were an indication of both changing consumer preferences and rising online competition. Over the past year, the industry saw growth in the forties, beating the Hong Kong market growth of 15.1%. Golden Eagle Retail Group leads the pack with its impressive earnings growth of 92.9% over the past year. However, analysts are not expecting this industry-beating trend to continue, with future growth expected to be 7.7% compared to the wider retail sector growth hovering in the twenties next year. As a future industry laggard in growth, Golden Eagle Retail Group may be a cheaper stock relative to its peers.
Is Golden Eagle Retail Group and the sector relatively cheap?
The retail industry is trading at a PE ratio of 16.1x, relatively similar to the rest of the Hong Kong stock market PE of 11.57x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 7.9% on equities compared to the market’s 9.5%. On the stock-level, Golden Eagle Retail Group is trading at a lower PE ratio of 10.35x, making it cheaper than the average retail stock. In terms of returns, Golden Eagle Retail Group generated 19.4% in the past year, which is 11.4% over the retail sector.
Golden Eagle Retail Group is a retail industry laggard in terms of its future growth outlook. This is possibly reflected in the PE ratio, with the stock trading below its peers. If the stock has been on your watchlist for a while, now may be the time to dig deeper. Although the market is expecting lower growth for the company relative to its peers, Golden Eagle Retail Group is also trading at a discount, meaning that there could be some value from a potential mispricing. However, before you make a decision on the stock, I suggest you look at Golden Eagle Retail Group’s fundamentals in order to build a holistic investment thesis.
- 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.
- Historical Track Record: What has 3308’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.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Golden Eagle Retail Group? 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 email@example.com.