Joyce Boutique Holdings Limited (SEHK:647), a HK$511.56M small-cap, operates in the retail industry impacted by the digital transformation for all retail channels. Physical store retailers faced the inevitable challenge of building up an online presence in order to enhance their omnichannel capabilities. Retail analysts are forecasting for the entire industry, a positive double-digit growth of 17.85% in the upcoming year , and a massive growth of 42.63% 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 Joyce Boutique Holdings is lagging or leading its competitors. View our latest analysis for Joyce Boutique Holdings
What’s the catalyst for Joyce Boutique Holdings’s sector growth?
E-commerce continues to be the fastest growing sales platform for consumer goods, changing the landscape for retailers. A large number of store closures and bankruptcies illustrates the shift in consumer preferences and increasing online competition. In the previous year, the industry saw growth in the twenties, beating the Hong Kong market growth of 10.89%. Joyce Boutique Holdings lags the pack with its lower growth rate of 10.63% over the past year, which indicates the company will be growing at a slower pace than its retail peers. As the company trails the rest of the industry in terms of growth, Joyce Boutique Holdings may also be a cheaper stock relative to its peers.
Is Joyce Boutique Holdings and the sector relatively cheap?
Retail companies are typically trading at a PE of 15.21x, relatively similar to the rest of the Hong Kong stock market PE of 13.25x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 8.81% on equities compared to the market’s 10.16%. Since Joyce Boutique Holdings’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Joyce Boutique Holdings’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:
Joyce Boutique Holdings has been a retail industry laggard in the past year. If Joyce Boutique 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 retail 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 Joyce Boutique Holdings’s fundamentals in order to build a holistic investment thesis.