Leju Holdings Limited (NYSE:LEJU), which is in the online retail business, and is based in China, received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$2.59 at one point, and dropping to the lows of US$1.59. 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 Leju Holdings's current trading price of US$1.74 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 Leju Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Leju Holdings still cheap?
According to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average, the stock currently looks expensive. 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 Leju Holdings’s ratio of 27.98x is above its peer average of 22.1x, which suggests the stock is trading at a higher price compared to the Online Retail industry. If you like the stock, you may want to keep an eye out for a potential price decline in the future. Given that Leju Holdings’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Leju Holdings?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. 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 profit expected to more than double over the next couple of years, the future seems bright for Leju Holdings. 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? LEJU’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe LEJU should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on LEJU for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for LEJU, which means it’s worth diving deeper into other factors 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 Leju Holdings. You can find everything you need to know about Leju Holdings in the latest infographic research report. If you are no longer interested in Leju 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 email@example.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.
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