Stock Valuation: China Maple Leaf Education Systems Ltd (1317)

Name of Company Country of Origin/ Exchange Traded Sector Stock Price
CHINA MAPLE LEAF EDUCATIONAL SYSTEMS LTD China/
HKSE
Consumer Defensive – Education – Education & Training Services HKD4.10
@ 30 Sep 2018
COMPANY PROFILE China Maple Leaf Educational Systems Ltd is engaged in international school education system in China. It offers a high-quality international education for students from preschool to high school.

China Maple Leaf Educational Systems Ltd is engaged in the international school education system in China. It offers a high-quality international education for students from preschool to high school. The group operates High school; Middle school; Preschool and Foreign national school; all of its schools are operated under the “Maple Leaf” brand. The Maple Leaf Model provides a western academic orientation and preparation for admission to western universities, blended with the richness of Chinese educational traditions and culture. The company generates the majority of revenue from high school operation.

Stock Code 1317
Stock Valuation Below

China Maple Leaf Education Systems Price to Sales

The Price to Sales Ratio is a commonly used valuation indicator for a stock. While not as popular as the Price to Earnings Ratio, it overcomes some of the limitations of the PE Ratio in that it can be used even when the company is not making a profit or only making minimal profits. However, it should not be used by itself because a company may be achieving sales but not profits.
At the price of HKD4.10 as at 30 Sep 2018, China Maple Leaf Educational Systems Ltd is trading at a Price to Sales Ratio of 6.5 times last 12 months sales.  This is a 17.0% discount to current fair Price to Sales Ratio of 7.8 times.
Is the stock undervalued? One should not just look at one indicator to determine the fair value of a stock.
ProThinker believes in using a combination of valuation methods to decide whether a stock is over or undervalued? The five ratios we use are Price to Earnings, Price to Sales, Price to Cash Flow, Price to Book and Dividend Yield. We use multiple methods to value a stock because each has its benefits as well as shortcomings. Price to Earnings and Price to Cash Flow Ratios relate stock price to profitability but are meaningless when the comany has negative earnings or cash flows. Price to Sales Ratio is more stable because sales are never negative. However, this does not tell us whether the company is able to sell profitably. Price to Book Ratio gives us an indication as to how much we are paying for the company’s assets but it is not directly related to the company’s profitability. Dividend Yield cannot be used for companies that are paying little to no dividends.
While it is important to value stocks based on multiple valuation methods, this often leads to differing views on valuation. One indicator may suggest that a stock is overvalued while another suggest that it is undervalued. This does not help an investor who needs to make a definite decision whether to buy, hold or sell the stock. That is why we advocate the use of a Composite Valuation Indicator, which is derived from the best combination of the five indicators above. A Composite Valuation Indicator will give you ONE conclusion on whether a stock is under or over valued.
To find out more about our valuation methodology, click here. 
Source of Data: Company description, historical financial statements data and price data are from gurufocus.com or moneycontrol.com. Estimates are from marketscreener.com – Thomson Reuters.
Disclaimer: This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither ProThinker nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of ProThinker. Copyright(c) 2018. All rights reserved.

 

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