Keen Ocean International Holding Limited (HKG:8070) shareholders won't be pleased to see that the share price has had a very rough month, dropping 31% and undoing the prior period's positive performance. The last month has meant the stock is now only up 3.5% during the last year.

Although its price has dipped substantially, given about half the companies in Hong Kong have price-to-earnings ratios (or "P/E's") above 10x, you may still consider Keen Ocean International Holding as a highly attractive investment with its 2.4x 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.

For example, consider that Keen Ocean International Holding's financial performance has been pretty ordinary lately as earnings growth is non-existent. It might be that many expect the uninspiring earnings performance to worsen, 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.

What Are Growth Metrics Telling Us About The Low P/E?

In order to justify its P/E ratio, Keen Ocean International Holding would need to produce anemic growth that's substantially trailing the market.

Retrospectively, the last year delivered virtually the same number to the company's bottom line as the year before. Still, the latest three year period has seen an excellent 1,329% overall rise in EPS, in spite of its uninspiring short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Comparing that to the market, which is only predicted to deliver 20% growth in the next 12 months, the company's momentum is stronger based on recent medium-term annualised earnings results.

In light of this, it's peculiar that Keen Ocean International Holding's P/E sits below the majority of other companies. Apparently some shareholders believe the recent performance has exceeded its limits and have been accepting significantly lower selling prices.

The Bottom Line On Keen Ocean International Holding's P/E

Keen Ocean International Holding's P/E looks about as weak as its stock price lately. 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 Keen Ocean International Holding currently trades on a much lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Having said that, be aware Keen Ocean International Holding is showing 3 warning signs in our investment analysis, and 1 of those is concerning.

If these risks are making you reconsider your opinion on Keen Ocean International Holding, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.