When close to half the companies in China have price-to-earnings ratios (or "P/E's") below 28x, you may consider Foshan Golden Milky Way Intelligent Equipment Co., Ltd. (SZSE:300619) as a stock to avoid entirely with its 56.3x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly elevated P/E.
For instance, Foshan Golden Milky Way Intelligent Equipment's receding earnings in recent times would have to be some food for thought. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/E from collapsing. If not, then existing shareholders may be quite nervous about the viability of the share price.
Although there are no analyst estimates available for Foshan Golden Milky Way Intelligent Equipment, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.
How Is Foshan Golden Milky Way Intelligent Equipment's Growth Trending?
The only time you'd be truly comfortable seeing a P/E as steep as Foshan Golden Milky Way Intelligent Equipment's is when the company's growth is on track to outshine the market decidedly.
Retrospectively, the last year delivered a frustrating 43% decrease to the company's bottom line. However, a few very strong years before that means that it was still able to grow EPS by an impressive 120% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.
Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 36% shows it's noticeably less attractive on an annualised basis.
With this information, we find it concerning that Foshan Golden Milky Way Intelligent Equipment is trading at a P/E higher than the market. It seems most investors are ignoring the fairly limited recent growth rates and are hoping for a turnaround in the company's business prospects. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with recent growth rates.
The Final Word
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.
We've established that Foshan Golden Milky Way Intelligent Equipment currently trades on a much higher than expected P/E since its recent three-year growth is lower than the wider market forecast. When we see weak earnings with slower than market growth, we suspect the share price is at risk of declining, sending the high P/E lower. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these prices as being reasonable.
And what about other risks? Every company has them, and we've spotted 6 warning signs for Foshan Golden Milky Way Intelligent Equipment (of which 2 are a bit concerning!) you should know about.
It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
在中国约有一半的公司市盈率(或“P/E”)低于28倍时,您可以考虑避免购买创业板股票Foshan Golden Milky Way Intelligent Equipment Co.,Ltd.(SZSE:300619),因为它的市盈率为56.3倍。尽管如此,我们需要深入挖掘,以确定高市盈率是否有合理的基础。
例如,最近Foshan Golden Milky Way Intelligent Equipment的营业收入不断下滑,这是一些值得思考的问题。可能是因为很多人期望该公司在未来的一段时间内表现仍会超过大部分公司,这使得市盈率不会崩溃。如果不是这样,那么现有股东可能会对股价的可行性感到相当紧张。
虽然目前没有关于Foshan Golden Milky Way Intelligent Equipment的分析师预估,但可以查看这个免费的数据可视化来了解该公司在收益、营业收入和现金流方面的情况。
Foshan Golden Milky Way Intelligent Equipment的成长态势如何? 在公司增长有望显著超过市场时,您唯一会真正放心看到市盈率像金银河这样高的时候。
只有Foshan Golden Milky Way Intelligent Equipment的增长有望明显超过市场时,您才会真正放心看到像它这样陡峭的市盈率。
回顾一下,最近一年Foshan Golden Milky Way Intelligent Equipment的净利润下降了令人沮丧的43%。不过,在此之前的几年中表现得非常出色,这意味着过去三年中它仍然能够总体上实现每股收益增长120%。因此,虽然他们希望保持增长,但股东们可能会欢迎中期的收益增长率。
将公司最近的中期收益轨迹与市场更广泛的一年预计扩张36%进行比较,发现其年化基础上显然不太吸引人。
根据这些信息,我们发现Foshan Golden Milky Way Intelligent Equipment的市盈率高于市场,这让我们感到担忧。似乎大多数投资者都忽略了近期有限的增长率,而是希望公司业务前景好转。如果市盈率降至与近期增长率相一致的水平,现有股东很有可能让自己面临未来的失望。
最终结论
虽然市盈率不应是您是否购买股票的决定性因素,但它是企业盈利预期的比较良好的指标。
我们已经确定,由于其近三年的增长低于市场预测,Foshan Golden Milky Way Intelligent Equipment目前的市盈率远高于预期。当我们看到收益疲软且增长低于市场时,我们怀疑股价面临下降风险,市盈率会跌至更接近近期增长率的水平。除非最近的中期情况出现显著改善,否则很难接受这些价格是合理的。
那么其他风险呢?每个公司都有,我们已经发现了Foshan Golden Milky Way Intelligent Equipment的6个警报(其中有2个有点令人担忧!)您应该知道。