CITIC Securities Company Limited's (SHSE:600030) price-to-earnings (or "P/E") ratio of 14.4x might make it look like a strong buy right now compared to the market in China, where around half of the companies have P/E ratios above 36x and even P/E's above 65x are quite common. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

The recently shrinking earnings for CITIC Securities have been in line with the market. It might be that many expect the company's earnings performance to degrade further, which has repressed the P/E. You'd much rather the company wasn't bleeding earnings if you still believe in the business. In saying that, existing shareholders may feel hopeful about the share price if the company's earnings continue tracking the market.

See our latest analysis for CITIC Securities

How Is CITIC Securities' Growth Trending?

There's an inherent assumption that a company should far underperform the market for P/E ratios like CITIC Securities' to be considered reasonable.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 3.2%. This has soured the latest three-year period, which nevertheless managed to deliver a decent 19% overall rise in EPS. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been mostly respectable for the company.

Looking ahead now, EPS is anticipated to climb by 17% during the coming year according to the twelve analysts following the company. With the market predicted to deliver 43% growth , the company is positioned for a weaker earnings result.

With this information, we can see why CITIC Securities is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From CITIC Securities' P/E?

While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

As we suspected, our examination of CITIC Securities' analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for CITIC Securities that you should be aware of.

Of course, you might also be able to find a better stock than CITIC Securities. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.