With a price-to-earnings (or "P/E") ratio of 12.7x Cheng De Lolo Company Limited (SZSE:000848) may be sending very bullish signals at the moment, given that almost half of all companies in China have P/E ratios greater than 30x and even P/E's higher than 55x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.
Cheng De Lolo 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. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.
See our latest analysis for Cheng De Lolo
SZSE:000848 Price to Earnings Ratio vs Industry January 24th 2024 Want the full picture on analyst estimates for the company? Then our free report on Cheng De Lolo will help you uncover what's on the horizon.
What Are Growth Metrics Telling Us About The Low P/E?
There's an inherent assumption that a company should far underperform the market for P/E ratios like Cheng De Lolo's to be considered reasonable.
If we review the last year of earnings growth, the company posted a worthy increase of 11%. The latest three year period has also seen an excellent 63% overall rise in EPS, aided somewhat by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.
Looking ahead now, EPS is anticipated to climb by 8.1% during the coming year according to the three analysts following the company. That's shaping up to be materially lower than the 42% growth forecast for the broader market.
In light of this, it's understandable that Cheng De Lolo's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.
The Final Word
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.
We've established that Cheng De Lolo maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.
Plus, you should also learn about these 2 warning signs we've spotted with Cheng De Lolo (including 1 which shouldn't be ignored).
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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Cheng De Lolo Company Limited(深圳證券交易所股票代碼:000848)的市盈率(或 “市盈率”)爲12.7倍,目前可能發出了非常看漲的信號,因爲幾乎有一半的中國公司的市盈率大於30倍,甚至市盈率高於55倍也並不罕見。但是,僅按面值計算市盈率是不明智的,因爲可以解釋爲什麼市盈率如此有限。
Cheng De Lolo最近確實做得很好,因爲其收益增長是正的,而大多數其他公司的收益卻在倒退。一種可能性是市盈率很低,因爲投資者認爲該公司的收益將像其他所有人一樣很快下降。如果不是,那麼現有股東就有理由對股價的未來走向非常樂觀。