The Jiangsu Xiuqiang Glasswork Co., Ltd. (SZSE:300160) share price has fared very poorly over the last month, falling by a substantial 25%. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 40% in that time.

In spite of the heavy fall in price, Jiangsu Xiuqiang Glasswork may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 16.8x, since almost half of all companies in China have P/E ratios greater than 28x and even P/E's higher than 50x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Recent times haven't been advantageous for Jiangsu Xiuqiang Glasswork as its earnings have been falling quicker than most other companies. It seems that many are expecting the dismal earnings performance to persist, which has repressed the P/E. If you still like the company, you'd want its earnings trajectory to turn around before making any decisions. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

How Is Jiangsu Xiuqiang Glasswork's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as low as Jiangsu Xiuqiang Glasswork's is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered a frustrating 16% 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 48% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing earnings over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the only analyst covering the company suggest earnings should grow by 37% over the next year. That's shaping up to be materially lower than the 41% growth forecast for the broader market.

With this information, we can see why Jiangsu Xiuqiang Glasswork is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Jiangsu Xiuqiang Glasswork's P/E

Jiangsu Xiuqiang Glasswork's recently weak share price has pulled its P/E below most other companies. 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.

We've established that Jiangsu Xiuqiang Glasswork 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. It's hard to see the share price rising strongly in the near future under these circumstances.

You always need to take note of risks, for example - Jiangsu Xiuqiang Glasswork has 1 warning sign we think you should be aware of.

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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