Despite an already strong run, HM International Holdings Limited (HKG:8416) shares have been powering on, with a gain of 27% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 34% in the last year.
In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about HM International Holdings' P/E ratio of 8.1x, since the median price-to-earnings (or "P/E") ratio in Hong Kong is also close to 10x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.
For instance, HM International Holdings' receding earnings in recent times would have to be some food for thought. One possibility is that the P/E is moderate because investors think the company might still do enough to be in line with the broader market in the near future. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.
SEHK:8416 Price to Earnings Ratio vs Industry May 21st 2024 We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on HM International Holdings' earnings, revenue and cash flow.
What Are Growth Metrics Telling Us About The P/E?
In order to justify its P/E ratio, HM International Holdings would need to produce growth that's similar to the market.
Retrospectively, the last year delivered a frustrating 12% decrease to the company's bottom line. Unfortunately, that's brought it right back to where it started three years ago with EPS growth being virtually non-existent overall during that time. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.
Comparing that to the market, which is predicted to deliver 20% growth in the next 12 months, the company's momentum is weaker based on recent medium-term annualised earnings results.
With this information, we find it interesting that HM International Holdings is trading at a fairly similar P/E to the market. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. They may be setting themselves up for future disappointment if the P/E falls to levels more in line with recent growth rates.
The Final Word
HM International Holdings' stock has a lot of momentum behind it lately, which has brought its P/E level with the market. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
Our examination of HM International Holdings revealed its three-year earnings trends aren't impacting its P/E as much as we would have predicted, given they look worse than current market expectations. When we see weak earnings with slower than market growth, we suspect the share price is at risk of declining, sending the moderate P/E lower. Unless the recent medium-term conditions improve, it's challenging to accept these prices as being reasonable.
It is also worth noting that we have found 4 warning signs for HM International Holdings (1 is a bit unpleasant!) that you need to take into consideration.
If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.
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有了这些信息,我们发现有趣的是,HM International Holdings的交易市盈率与市场相当相似。看来大多数投资者都无视近期相当有限的增长率,愿意为股票敞口付出代价。如果市盈率降至更符合近期增长率的水平,他们可能会为未来的失望做好准备。
最后一句话
HM International Holdings的股票最近势头强劲,这使其市盈率与市场持平。通常,在做出投资决策时,我们谨慎行事,不要过多地解读市盈率,尽管这可以充分揭示其他市场参与者对公司的看法。
我们对HM International Holdings的审查显示,其三年收益趋势对其市盈率的影响没有我们预期的那么大,因为这些趋势看起来比当前的市场预期还要糟糕。当我们看到收益疲软且增长慢于市场增长时,我们怀疑股价有下跌的风险,从而使温和的市盈率走低。除非最近的中期状况有所改善,否则很难接受这些价格的合理性。