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HRnetGroup Limited (SGX:CHZ), which is in the professional services business, and is based in Singapore, led the SGX gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Today I will analyse the most recent data on HRnetGroup’s outlook and valuation to see if the opportunity still exists.
View our latest analysis for HRnetGroup
What's the opportunity in HRnetGroup?
Good news, investors! HRnetGroup is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. 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 HRnetGroup’s ratio of 9.95x is below its peer average of 15.43x, which indicates the stock is trading at a lower price compared to the Professional Services industry. Another thing to keep in mind is that HRnetGroup’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
Can we expect growth from HRnetGroup?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of HRnetGroup, it is expected to deliver a relatively unexciting earnings growth of 4.2%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since CHZ is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you’ve been keeping an eye on CHZ for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy CHZ. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.