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Is It Too Late To Consider Buying Bright Scholar Education Holdings Limited (NYSE:BEDU)?

Simply Wall St

Bright Scholar Education Holdings Limited (NYSE:BEDU), which is in the consumer services business, and is based in China, saw significant share price movement during recent months on the NYSE, rising to highs of US$9.66 and falling to the lows of US$8.42. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Bright Scholar Education Holdings's current trading price of US$8.95 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Bright Scholar Education Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Bright Scholar Education Holdings

What's the opportunity in Bright Scholar Education Holdings?

According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Bright Scholar Education Holdings’s ratio of 27.14x is trading slightly above its industry peers’ ratio of 25.49x, which means if you buy Bright Scholar Education Holdings today, you’d be paying a relatively reasonable price for it. And if you believe Bright Scholar Education Holdings should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because Bright Scholar Education Holdings’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What kind of growth will Bright Scholar Education Holdings generate?

NYSE:BEDU Past and Future Earnings, February 20th 2020

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With revenues expected to grow by 56% over the next couple of years, the future seems bright for Bright Scholar Education Holdings. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? BEDU’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at BEDU? Will you have enough conviction to buy should the price fluctuate below the true value?

Are you a potential investor? If you’ve been keeping tabs on BEDU, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for BEDU, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Bright Scholar Education Holdings. You can find everything you need to know about Bright Scholar Education Holdings in the latest infographic research report. If you are no longer interested in Bright Scholar Education Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.