Zhongsheng Group Holdings Limited (HKG:881), is not the largest company out there, but it saw a significant share price rise of 75% in the past couple of months on the SEHK. While good news for shareholders, the company has traded much higher in the past year. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock's share price. However, what if the stock is still a bargain? Today we will analyse the most recent data on Zhongsheng Group Holdings's outlook and valuation to see if the opportunity still exists.

What Is Zhongsheng Group Holdings Worth?

According to our price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, we've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. We find that Zhongsheng Group Holdings's ratio of 9.47x is trading slightly below its industry peers' ratio of 9.82x, which means if you buy Zhongsheng Group Holdings today, you'd be paying a reasonable price for it. And if you believe Zhongsheng Group Holdings should be trading in this range, then there isn't much room for the share price to grow beyond the levels of other industry peers over the long-term. Furthermore, Zhongsheng Group Holdings's share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.

Can we expect growth from Zhongsheng Group 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. Zhongsheng Group Holdings' earnings over the next few years are expected to increase by 41%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? 881's optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven't considered today, such as the track record of its management team. Have these factors changed since the last time you looked at 881? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you've been keeping tabs on 881, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 881, which means it's worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

If you want to dive deeper into Zhongsheng Group Holdings, you'd also look into what risks it is currently facing. Case in point: We've spotted 3 warning signs for Zhongsheng Group Holdings you should be aware of.

If you are no longer interested in Zhongsheng Group Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.