Is Minsheng Education Group Company Limited (HKG:1569) A Service Industry Laggard Or Leader?
Minsheng Education Group Company Limited (HKG:1569), a HK$6.3b small-cap, is a consumer services company operating in an industry, which generally follows the ups and downs of the economic cycle, as its services cater to various industries across different sectors. Consumer services analysts are forecasting for the entire industry, an extremely robust growth of 30% in the upcoming year , and a whopping triple-digit earnings growth over the next couple of years. This rate is larger than the growth rate of the Hong Kong stock market as a whole. In this article, I’ll take you through the sector growth expectations, as well as evaluate whether Minsheng Education Group is lagging or leading in the industry.
See our latest analysis for Minsheng Education Group
What’s the catalyst for Minsheng Education Group’s sector growth?
A main driver of the industry has been the growing relevance of e-commerce, enabling companies to reduce cost to serve while growing market presence. Over the past year, the industry saw growth in the twenties, beating the Hong Kong market growth of 15%. Minsheng Education Group lags the pack with its lower growth rate of 21% over the past year, which indicates the company has been growing at a slower pace than its consumer services peers. However, in the upcoming year, Minsheng Education Group is expected to deliver growth in-line with its industry peers, at a growth rate of 30%.
Is Minsheng Education Group and the sector relatively cheap?
Consumer services companies are typically trading at a PE of 23.7x, higher than the rest of the Hong Kong stock market PE of 11.56x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry did return a higher 13% compared to the market’s 9.5%, which may be indicative of past tailwinds. On the stock-level, Minsheng Education Group is trading at a lower PE ratio of 17.35x, making it cheaper than the average consumer services stock. In terms of returns, Minsheng Education Group generated 9.5% in the past year, which is 3.2% below the consumer services sector.
Next Steps:
Minsheng Education Group’s future growth prospect aligns with that of the broader market and its PE is below its services peers, suggesting it is also trading at a relatively cheaper price. Perhaps the market hasn’t fully accounted for the growth, meaning now may be the right time to accumulate more of, or to enter into, the stock. However, before you make a decision on the stock, I suggest you look at Minsheng Education 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 1569’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 Minsheng Education 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 editorial-team@simplywallst.com.
