Unfortunately for some shareholders, the Qinghai Huzhu TianYouDe Highland Barley Spirit Co., Ltd. (SZSE:002646) share price has dived 28% in the last thirty days, prolonging recent pain. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 42% share price drop.
Although its price has dipped substantially, given close to half the companies in China have price-to-earnings ratios (or "P/E's") below 24x, you may still consider Qinghai Huzhu TianYouDe Highland Barley Spirit as a stock to avoid entirely with its 55.4x 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 lofty.
Qinghai Huzhu TianYouDe Highland Barley Spirit 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. The P/E is probably high because investors think the company will continue to navigate the broader market headwinds better than most. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.
SZSE:002646 Price to Earnings Ratio vs Industry February 6th 2024 Want the full picture on analyst estimates for the company? Then our free report on Qinghai Huzhu TianYouDe Highland Barley Spirit will help you uncover what's on the horizon.
How Is Qinghai Huzhu TianYouDe Highland Barley Spirit's Growth Trending?
Qinghai Huzhu TianYouDe Highland Barley Spirit's P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.
Retrospectively, the last year delivered virtually the same number to the company's bottom line as the year before. That's essentially a continuation of what we've seen over the last three years, as its EPS growth has been virtually non-existent for that entire period. So it seems apparent to us that the company has struggled to grow earnings meaningfully over that time.
Shifting to the future, estimates from the only analyst covering the company suggest earnings should grow by 52% over the next year. That's shaping up to be materially higher than the 42% growth forecast for the broader market.
In light of this, it's understandable that Qinghai Huzhu TianYouDe Highland Barley Spirit's P/E sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.
The Bottom Line On Qinghai Huzhu TianYouDe Highland Barley Spirit's P/E
Even after such a strong price drop, Qinghai Huzhu TianYouDe Highland Barley Spirit's P/E still exceeds the rest of the market significantly. 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.
As we suspected, our examination of Qinghai Huzhu TianYouDe Highland Barley Spirit's analyst forecasts revealed that its superior earnings outlook is contributing to its high P/E. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. Unless these conditions change, they will continue to provide strong support to the share price.
You should always think about risks. Case in point, we've spotted 1 warning sign for Qinghai Huzhu TianYouDe Highland Barley Spirit you should be aware of.
Of course, you might also be able to find a better stock than Qinghai Huzhu TianYouDe Highland Barley Spirit. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.
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