The Huakai Yibai Technology Co.,Ltd. (SZSE:300592) share price has fared very poorly over the last month, falling by a substantial 26%. Looking back over the past twelve months the stock has been a solid performer regardless, with a gain of 10%.

Following the heavy fall in price, given about half the companies in China have price-to-earnings ratios (or "P/E's") above 31x, you may consider Huakai Yibai TechnologyLtd as a highly attractive investment with its 13.6x 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 so limited.

Huakai Yibai TechnologyLtd 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 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.

View our latest analysis for Huakai Yibai TechnologyLtd

Is There Any Growth For Huakai Yibai TechnologyLtd?

There's an inherent assumption that a company should far underperform the market for P/E ratios like Huakai Yibai TechnologyLtd's to be considered reasonable.

If we review the last year of earnings growth, the company posted a terrific increase of 420%. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Turning to the outlook, the next year should generate growth of 31% as estimated by the three analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 42%, which is noticeably more attractive.

In light of this, it's understandable that Huakai Yibai TechnologyLtd'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.

What We Can Learn From Huakai Yibai TechnologyLtd's P/E?

Huakai Yibai TechnologyLtd's P/E looks about as weak as its stock price lately. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Huakai Yibai TechnologyLtd's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. 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.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for Huakai Yibai TechnologyLtd with six simple checks will allow you to discover any risks that could be an issue.

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.