Pop Mart International Group (SEHK:9992) shares have faced a slide of 20% over the past month, prompting investors to take a closer look at what is driving the change and how it affects valuation.
See our latest analysis for Pop Mart International Group.
The recent slide comes after a stellar run for Pop Mart International Group, as the 1-year total shareholder return stands at an impressive 183%. While the share price dropped nearly 20% in the last month, momentum is still positive in a broader context, which hints that changing perceptions around risks and growth potential are driving near-term volatility.
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With shares retreating sharply after such a strong run, investors are left to ask whether this recent dip means Pop Mart is trading below its true value, or if the market has already factored in all the future upside.
Pop Mart International Group trades at a price-to-earnings (P/E) ratio of 36.7x, which places it well above both the industry and peer averages. Compared to the last close price of HK$204.8, this high multiple suggests the market is pricing in substantial future growth for the company.
The price-to-earnings ratio measures how much investors are willing to pay for each dollar of earnings, making it a central gauge of market optimism about future profitability. For a consumer company experiencing rapid growth in Hong Kong’s specialty retail segment, a higher P/E can signal investor confidence in ongoing expansion and high earnings potential.
However, Pop Mart’s P/E is more than double the Hong Kong Specialty Retail industry average of 12x and significantly exceeds the estimated fair price-to-earnings ratio of 27.1x. This indicates that the stock is being priced at a marked premium to both its immediate competitors and what regression analysis suggests is appropriate for its growth and earnings profile. If the company cannot maintain its current rate of expansion, the multiple may revert closer to sector norms or its fair value, potentially leading to a valuation reset.
Explore the SWS fair ratio for Pop Mart International Group
Result: Price-to-Earnings of 36.7x (OVERVALUED)
However, slowing revenue momentum or disappointing earnings in future quarters could challenge the high expectations that are built into Pop Mart’s current valuation.
Find out about the key risks to this Pop Mart International Group narrative.