China Assurance Finance Group Limited (SEHK:8090), a HK$1.56B small-cap, is a financial services company operating in an industry, which tends to draw the more conservative investors who attracted by their steady revenue and the above-average dividend yields. Financial services analysts are forecasting for the entire industry, a relatively muted growth of 6.67% in the upcoming year . Today, I’ll take you through the sector growth expectations, and also determine whether China Assurance Finance Group is a laggard or leader relative to its financial sector peers. See our latest analysis for China Assurance Finance Group
What’s the catalyst for China Assurance Finance Group’s sector growth?
Recently, government and overseas regulators involvement has increased to play a prominent role, closely examining and controlling day-to-day business administration of certain companies. In the past year, the industry delivered growth in the teens, beating the Hong Kong market growth of 11.08%. China Assurance Finance Group lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means China Assurance Finance Group may be trading cheaper than its peers.
Is China Assurance Finance Group and the sector relatively cheap?
Financial services companies are typically trading at a PE of 14.1x, in-line with the Hong Kong stock market PE of 14.5x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a lower 6.36% compared to the market’s 10.13%, potentially indicative of past headwinds. Since China Assurance Finance Group’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge China Assurance Finance Group’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:
China Assurance Finance Group has been a financial services industry laggard in the past year. If China Assurance Finance Group 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 financial 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 China Assurance Finance Group’s fundamentals in order to build a holistic investment thesis.