Grand Cayman, Cayman Islands-headquartered E-Home Household Service Holdings Limited (EJH) is an integrated household service company that does business in the People’s Republic of China, operating through three segments: Installation and Maintenance; Housekeeping; and Senior Care Services.
EJH shares began trading on May 14, 2021 on NASDAQ Capital Market under the ticker “EJH.” The company’s initial public offering comprised 5,555,556 ordinary shares at $4.50 per ordinary share, raising $25 million total gross proceeds. However, the stock has since slumped 98.5% in price .
Furthermore, EJH shares have declined 77.6% in price over the past six months and 43.5% year-to-date. But the stock has been gaining momentum lately, fueled by some recent positive developments at the company. EJH’s stock has gained 40.5% over the past five days to close the last trading session at $0.84.
Here is what could shape EJH’s performance in the near term:
Digitalized Business Transformation Initiatives Should Drive Growth
Last month, EJH announced its plans to enter the metaverse space with digitalized business transformation initiatives. The company plans to set up artificial intelligence (AI) technology unit and form strategic collaborations with various AI technology partners to advance its metaverse strategy.
On March 3, EJH announced that it would launch a Digital Human as a Service (DHaaS) that will debut on March 18, 2022, leveraging front-end AI technologies. DHaaS features a virtual digital human customer service guide that aims to provide seamless, 24/7 assistance for household services clients in the Metaverse virtual world. This launch should improve its operational efficacy and help optimize its business operation and diversify household services for its clients.
Also, in January, the company announced that it was establishing a cleaning robot equipment leasing department in the cleaning service sector to promote the growth of its cleaning service business. The new business is expected to contribute approximately $15 million in revenue and $3 million in net income to the company this year.
Mixed Profitability
EJH’s 35.05% gross profit margin is 2.4% lower than the 35.91% industry average, while its levered FCF margin is 17.8% lower than the 5.03% industry average. However, its 12.19% EBIT margin is 30.9% higher than the 9.31% industry average.
EJH’s 13.20% ROE is 23.5% lower than the 17.25% industry average. But its ROA and ROTC of 8.62% and 10.94%, respectively, are 41% and 38.4% higher than the industry averages.
POWR Ratings Reflect Uncertainty
EJH has an overall C rating of C, which translates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a C grade for Growth. This is justified because its revenues have increased at a 17.5% CAGR over the past three years, but its EBIT and EPS have declined at 11.3% and 13.5% CAGRs, respectively, over the same period.
EJH also has a C grade for Quality, which is consistent with its mixed profitability.
Among the 44 stocks in the Outsourcing - Business Services industry, EJH is ranked #40.
Beyond what I have stated above, one can also view EJH’s grades for Value, Sentiment, Momentum, and Stability here.
View the top-rated stocks in the Outsourcing - Business Services industry here.
Bottom Line
EJH is expanding its capabilities via investment in digital transformation, which should help the business grow. However, EJH shares have been on a wild ride since it debuted on NASDAQ. Although the stock has been gaining lately, I think it could be wise to wait for more clarity on its near-term prospects before investing in the stock.
How Does E-Home Household Service Holdings Limited (EJH) Stack Up Against its Peers?
While EJH has an overall POWR Rating of C, one might want to consider taking a look at its industry peers, ARC Document Solutions, Inc. (ARC), Civeo Corporation (CVEO), and TriNet Group, Inc. (TNET), which have an A (Strong Buy) rating.
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EJH shares fell $0.09 (-10.37%) in premarket trading Monday. Year-to-date, EJH has declined -47.97%, versus a -9.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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