Ocean Line Port Development Limited (HKG:8502) shareholders won't be pleased to see that the share price has had a very rough month, dropping 25% and undoing the prior period's positive performance. Longer-term shareholders would now have taken a real hit with the stock declining 9.2% in the last year.
In spite of the heavy fall in price, given about half the companies in Hong Kong have price-to-earnings ratios (or "P/E's") above 10x, you may still consider Ocean Line Port Development as a highly attractive investment with its 3.7x 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.
For example, consider that Ocean Line Port Development's financial performance has been poor lately as its earnings have been in decline. One possibility is that the P/E is low because investors think the company won't do enough to avoid underperforming the broader market in the near future. However, if this doesn't eventuate then existing shareholders may be feeling optimistic about the future direction of the share price.
SEHK:8502 Price to Earnings Ratio vs Industry March 31st 2024 Although there are no analyst estimates available for Ocean Line Port Development, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.
Does Growth Match The Low P/E?
The only time you'd be truly comfortable seeing a P/E as depressed as Ocean Line Port Development's is when the company's growth is on track to lag the market decidedly.
If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 7.8%. Even so, admirably EPS has lifted 33% in aggregate from three years ago, notwithstanding the last 12 months. 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.
Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 22% shows it's noticeably less attractive on an annualised basis.
With this information, we can see why Ocean Line Port Development is trading at a P/E lower than the market. It seems most investors are expecting to see the recent limited growth rates continue into the future and are only willing to pay a reduced amount for the stock.
The Key Takeaway
Shares in Ocean Line Port Development have plummeted and its P/E is now low enough to touch the ground. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.
We've established that Ocean Line Port Development maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. If recent medium-term earnings trends continue, it's hard to see the share price rising strongly in the near future under these circumstances.
Having said that, be aware Ocean Line Port Development is showing 2 warning signs in our investment analysis, you should know about.
You might be able to find a better investment than Ocean Line Port Development. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).
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Ocean Line Port Development的股價暴跌,其市盈率現在已經足夠低,足以觸底。我們可以說,市盈率的力量主要不在於作爲估值工具,而是衡量當前投資者情緒和未來預期。
我們已經確定,Ocean Line Port Development維持了較低的市盈率,原因是其最近三年的增長疲軟,低於更廣泛的市場預測,正如預期的那樣。在現階段,投資者認爲,收益改善的可能性不足以證明更高的市盈率是合理的。如果最近的中期收益趨勢繼續下去,在這種情況下,很難看到股價在不久的將來強勁上漲。
話雖如此,請注意,在我們的投資分析中,Ocean Line Port Development顯示出兩個警告信號,你應該知道。