Unfortunately for some shareholders, the Zhejiang Qianjiang Motorcycle Co., Ltd. (SZSE:000913) share price has dived 26% in the last thirty days, prolonging recent pain. For any long-term shareholders, the last month ends a year to forget by locking in a 66% share price decline.

Since its price has dipped substantially, given about half the companies in China have price-to-earnings ratios (or "P/E's") above 27x, you may consider Zhejiang Qianjiang Motorcycle as a highly attractive investment with its 11.3x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

Zhejiang Qianjiang Motorcycle certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, which has repressed the P/E. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Is There Any Growth For Zhejiang Qianjiang Motorcycle?

The only time you'd be truly comfortable seeing a P/E as depressed as Zhejiang Qianjiang Motorcycle's is when the company's growth is on track to lag the market decidedly.

If we review the last year of earnings growth, the company posted a worthy increase of 3.1%. The latest three year period has also seen an excellent 92% overall rise in EPS, aided somewhat by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Turning to the outlook, the next year should generate growth of 20% as estimated by the four analysts watching the company. That's shaping up to be materially lower than the 41% growth forecast for the broader market.

With this information, we can see why Zhejiang Qianjiang Motorcycle is trading at a P/E lower than the market. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

What We Can Learn From Zhejiang Qianjiang Motorcycle's P/E?

Shares in Zhejiang Qianjiang Motorcycle have plummeted and its P/E is now low enough to touch the ground. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Zhejiang Qianjiang Motorcycle's 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.

It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Zhejiang Qianjiang Motorcycle, and understanding these should be part of your investment process.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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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.