With a P/E ratio of 22, Guangzhou Tinci Materials Technology Co., Ltd. (SZSE:002709) could be considered an attractive investment, with nearly half of Chinese companies trading at a price-to-earnings (P/E) ratio above 28. However, there may be a reason for the low P/E, and further investigation is needed to determine if it is justified.
While the market has been experiencing earnings growth recently, Guangzhou Tiandi Materials Technology’s earnings have been slowing, which isn’t great. Many seem to expect the weak earnings performance to continue, which is pushing down the price-to-earnings multiple. If you still like the company, you’ll hope this isn’t the case, so you could potentially buy shares while they’re falling out of favor.
Read our latest analysis for Guangzhou Tingchi Material Technology
SZSE:002709 Price to Earnings Ratio vs Industry 30 July 2024 Want to find out what analysts think about Guangzhou Tinci Materials Technology’s future compared to the industry? If so, our free report is a great place to start.
Is there growth for Guangzhou Tingchi Material Technology?
For Guangzhou Tianhuang Materials Technology to justify its price-earnings multiple, it will need to achieve slow growth that lags behind the market growth rate.
Looking back, we can start by noting that the company’s earnings per share growth last year was a disappointing 73% drop, which is nothing to be excited about. However, the years prior to that were very strong, allowing the company to grow EPS by a combined 64% over the past three years. So, we can start by noting that, while there have been some stumbles along the way, the company has done a very good job of growing earnings overall over this period.
Turning to the outlook, analysts monitoring the company predict that it will grow at 21% per year over the next three years. With the market expected to grow at 24% per year, the company’s earnings are expected to stagnate.
Given this, it’s no surprise that Guangzhou Tianhuang Materials Technology’s price-to-earnings multiple is lower than most other companies, as many investors see limited future growth and are likely willing to pay less for the company’s shares.
Key Takeaways
Generally, we like to limit the use of price-to-earnings ratios to revealing what the market thinks about the overall health of a company.
As expected, a survey of analyst forecasts for Guangzhou Tianhuang Materials Technology reveals that the company’s poor earnings outlook is driving its low P/E ratio. Currently, shareholders have accepted that future earnings will probably not bring any pleasant surprises and have accepted the low P/E ratio. Under these circumstances, it is difficult to see a significant rise in the stock price in the near future.
You should always think about the risks, as an example, we’ve spotted 2 warning signs for Guangzhou Tinci Materials Technology that you should be aware of.
Of course, you might find a great investment by looking at several promising candidates, so take a peek at this free list of companies trading on a low P/E and with a strong track record of growth.
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This article by Simply Wall St is of general nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell a stock, and does not take into account your objectives or financial situation. We aim to provide long-term analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned herein.
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