Xueda (Xiamen) Education Technology Group Co., Ltd (SZSE:000526), might not be a large cap stock, but it led the SZSE gainers with a relatively large price hike in the past couple of weeks. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. As a stock with high coverage by analysts, you could assume any recent changes in the company's outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let's examine Xueda (Xiamen) Education Technology Group's valuation and outlook in more detail to determine if there's still a bargain opportunity.

What's The Opportunity In Xueda (Xiamen) Education Technology Group?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We've used the price-to-earnings ratio in this instance because there's not enough visibility to forecast its cash flows. The stock's ratio of 31.07x is currently trading slightly below its industry peers' ratio of 36.15x, which means if you buy Xueda (Xiamen) Education Technology Group today, you'd be paying a decent price for it. And if you believe Xueda (Xiamen) Education Technology Group 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, it seems like Xueda (Xiamen) Education Technology Group's share price is quite stable, which means there may be less chances to buy low in the future now that it's priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Xueda (Xiamen) Education Technology Group look like?

Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. With profit expected to grow by 71% over the next couple of years, the future seems bright for Xueda (Xiamen) Education Technology Group. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in 000526's positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven't considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at 000526? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you've been keeping tabs on 000526, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 000526, 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.

It can be quite valuable to consider what analysts expect for Xueda (Xiamen) Education Technology Group from their most recent forecasts. So feel free to check out our free graph representing analyst forecasts.

If you are no longer interested in Xueda (Xiamen) Education Technology Group, 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.