China Xiniya Fashion Limited (NYSE:XNY), a USD¥18.32M small-cap, operates in the consumer discretionary industry, whose performance is predominantly driven by consumer confidence. Macro elements tend to determine how fast, and how often, consumers buy luxury goods. Consumer discretionary analysts are forecasting for the entire industry, a positive double-digit growth of 14.75% in the upcoming year, and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the US stock market as a whole. Today, I will analyse the industry outlook, and also determine whether XNY is a laggard or leader relative to its consumer discretionary sector peers. Check out our latest analysis for China Xiniya Fashion

What’s the catalyst for XNY’s sector growth?

E-retailing is expected to remain the fastest growing sales channel, shifting the retail landscape. Significant number of retail store closures and bankruptcies were an indication of both changing consumer preferences and rising online competition. Over the past year, the industry saw negative growth of -6.10%, underperforming the US market growth of 4.49%. XNY leads the pack with its impressive earnings growth of 60.53% over the past year. This proven growth may make XNY a more expensive stock relative to its peers.

Is XNY and the sector relatively cheap?

The luxury goods sector’s PE is currently hovering around 20x, relatively similar to the rest of the US stock market PE of 22x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. However, the industry returned a higher 12.56% compared to the market’s 9.99%, potentially illustrative of past tailwinds. Since XNY’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge XNY’s value is to assume the stock should be relatively in-line with its industry.

What this means for you:

Are you a shareholder? XNY recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto XNY as part of your portfolio. However, if you’re relatively concentrated in luxury goods, you may want to value XNY based on its cash flows to determine if it is overpriced based on its current growth outlook.

Are you a potential investor? If XNY has been on your watchlist for a while, now may be the time to enter into the stock, if you like its ability to deliver growth and are not highly concentrated in the luxury goods industry. Before you make a decision on the stock, take a look at XNY’s cash flows and assess whether the stock is trading at a fair price.

For a deeper dive into China Xiniya Fashion’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other consumer discretionary stocks instead? Use our free playform to see my list of over 100 other consumer discretionary companies trading on the market.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.