In This Article:
China Maple Leaf Educational Systems Limited (HKG:1317), a HK$11.89b 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, a positive double-digit growth of 29.8% in the upcoming year , and an enormous 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. Below, I will examine the sector growth prospects, as well as evaluate whether China Maple Leaf Educational Systems is lagging or leading in the industry.
View our latest analysis for China Maple Leaf Educational Systems
What’s the catalyst for China Maple Leaf Educational Systems’s sector growth?
E-commerce remains a later driver of growth for commercial services, which enables service companies to grow share and reduce cost to serve. In the previous year, the industry saw growth in the twenties, beating the Hong Kong market growth of 15.3%. China Maple Leaf Educational Systems is neither a lagger nor a leader, and has been growing in-line with its industry peers at around 28.4% in the prior year. However, analysts are not expecting this trend to continue, with future growth expected to be 27.2% compared to the wider consumer services sector growth hovering in the twenties next year. As a future industry laggard in growth, China Maple Leaf Educational Systems may be a cheaper stock relative to its peers.
Is China Maple Leaf Educational Systems and the sector relatively cheap?
The consumer services industry is trading at a PE ratio of 25.03x, higher than the rest of the Hong Kong stock market PE of 11.62x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry did return a higher 12.7% compared to the market’s 9.5%, which may be indicative of past tailwinds. On the stock-level, China Maple Leaf Educational Systems is trading at a lower PE ratio of 19.54x, making it cheaper than the average consumer services stock. In terms of returns, China Maple Leaf Educational Systems generated 13.8% in the past year, which is 1.0% over the consumer services sector.
Next Steps:
China Maple Leaf Educational Systems is a consumer services 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, China Maple Leaf Educational Systems 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 China Maple Leaf Educational Systems’s fundamentals in order to build a holistic investment thesis.