Tianshan Aluminum Group Co.,Ltd (SZSE:002532) shareholders would be excited to see that the share price has had a great month, posting a 25% gain and recovering from prior weakness. The bad news is that even after the stocks recovery in the last 30 days, shareholders are still underwater by about 4.0% over the last year.

Although its price has surged higher, given about half the companies in China have price-to-earnings ratios (or "P/E's") above 32x, you may still consider Tianshan Aluminum GroupLtd as an attractive investment with its 17.5x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

Tianshan Aluminum GroupLtd hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If you still 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 Tianshan Aluminum GroupLtd?

In order to justify its P/E ratio, Tianshan Aluminum GroupLtd would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered a frustrating 38% decrease to the company's bottom line. As a result, earnings from three years ago have also fallen 27% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Shifting to the future, estimates from the five analysts covering the company suggest earnings should grow by 63% over the next year. That's shaping up to be materially higher than the 37% growth forecast for the broader market.

With this information, we find it odd that Tianshan Aluminum GroupLtd is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Bottom Line On Tianshan Aluminum GroupLtd's P/E

Despite Tianshan Aluminum GroupLtd's shares building up a head of steam, its P/E still lags most other companies. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Tianshan Aluminum GroupLtd currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

Having said that, be aware Tianshan Aluminum GroupLtd is showing 4 warning signs in our investment analysis, and 1 of those is potentially serious.

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.