Lufax shares fell by -6.1% during the day's morning session, and are now trading at a price of $1.9. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly.
Lufax Holding Ltd operates a technology-empowered personal financial services platform in China. The company belongs to the Financial Services sector, which has an average price to earnings (P/E) ratio of 13.34. In contrast, Lufax has a trailing 12 month P/E ratio of 1.8 -- which is extremely low.
One of the main reasons not to blindly invest in a company with a low P/E ratio is that it might have low growth expectations. Low growth correlates with low stock performance, so it's useful to factor growth into the valuation process. One of the easiest ways to do this is to divide the company's P/E ratio by its expected growth rate, which results in the price to earnings growth, or PEG ratio.
Lufax's PEG ratio is 20.4, which shows that the stock is overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
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