King Force Group Holdings Limited (SEHK:8315), a HK$234.62M small-cap, operates in the commercial services industry, which generally follows the ups and downs of the economic cycle, as its services cater to various industries across different sectors. Commercial services analysts are forecasting for the entire industry, a positive double-digit growth of 18.09% in the upcoming year , and an optimistic near-term growth of 19.38% over the next couple of years. However, this rate came in below 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 King Force Group Holdings is lagging or leading in the industry. Check out our latest analysis for King Force Group Holdings

What’s the catalyst for King Force Group Holdings’s sector growth?

A main driver of the industry has been the growing relevance of e-commerce for commercial services, enabling companies to reduce cost to serve while growing market presence at the same time. More than ever, it is crucial for the incumbents to position itself to respond to the growing relevance of stock-less independent dealers, further service pure e-commerce players and also build on their own e-commerce capabilities. In the past year, the industry delivered negative growth of -0.0059%, underperforming the Hong Kong market growth of 11.05%. King Force Group Holdings lags the pack with its earnings falling by more than half over the past year, which indicates the company will be growing at a slower pace than its commercial services peers. As the company trails the rest of the industry in terms of growth, King Force Group Holdings may also be a cheaper stock relative to its peers.

Is King Force Group Holdings and the sector relatively cheap?

The commercial services sector’s PE is currently hovering around 20.3x, above the broader Hong Kong stock market PE of 14.4x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry returned a similar 11.98% on equities compared to the market’s 10.13%. Since King Force Group Holdings’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge King Force Group Holdings’s value is to assume the stock should be relatively in-line with its industry.

Next Steps:

King Force Group Holdings has been a commercial services industry laggard in the past year. If King Force Group Holdings has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although it delivered lower growth relative to its services peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. However, before you make a decision on the stock, I suggest you look at King Force Group Holdings’s fundamentals in order to build a holistic investment thesis.

• 1. 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.

• 2. Historical Track Record: What has 8315’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.

• 3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of King Force Group Holdings? 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 pass 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.