To the annoyance of some shareholders, Infinity Logistics and Transport Ventures Limited (HKG:1442) shares are down a considerable 26% in the last month, which continues a horrid run for the company. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 71% loss during that time.
In spite of the heavy fall in price, Infinity Logistics and Transport Ventures' price-to-earnings (or "P/E") ratio of 21.8x might still make it look like a strong sell right now compared to the market in Hong Kong, where around half of the companies have P/E ratios below 9x and even P/E's below 5x are quite common. 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.
As an illustration, earnings have deteriorated at Infinity Logistics and Transport Ventures over the last year, which is not ideal at all. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.
SEHK:1442 Price to Earnings Ratio vs Industry April 8th 2024 Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Infinity Logistics and Transport Ventures will help you shine a light on its historical performance.
How Is Infinity Logistics and Transport Ventures' Growth Trending?
In order to justify its P/E ratio, Infinity Logistics and Transport Ventures would need to produce outstanding growth well in excess of the market.
Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 49%. The last three years don't look nice either as the company has shrunk EPS by 30% in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.
In contrast to the company, the rest of the market is expected to grow by 20% over the next year, which really puts the company's recent medium-term earnings decline into perspective.
In light of this, it's alarming that Infinity Logistics and Transport Ventures' P/E sits above the majority of other companies. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. Only the boldest would assume these prices are sustainable as a continuation of recent earnings trends is likely to weigh heavily on the share price eventually.
The Key Takeaway
A significant share price dive has done very little to deflate Infinity Logistics and Transport Ventures' very lofty P/E. 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.
Our examination of Infinity Logistics and Transport Ventures revealed its shrinking earnings over the medium-term aren't impacting its high P/E anywhere near as much as we would have predicted, given the market is set to grow. Right now we are increasingly uncomfortable with the high P/E as this earnings performance is highly unlikely to support such positive sentiment for long. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these prices as being reasonable.
It's always necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Infinity Logistics and Transport Ventures (at least 1 which is a bit concerning), and understanding these should be part of your investment process.
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.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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.
令一些股東感到煩惱的是,Infinity Logistics and Transport Ventures Limited(HKG: 1442)的股價在上個月下跌了26%,這延續了公司的糟糕表現。對於股東來說,最近的下跌結束了災難性的十二個月,在此期間,股東虧損了71%。
儘管價格大幅下跌,但與香港市場相比,Infinity Logistics and Transport Ventures的21.8倍市盈率(或 “市盈率”)仍可能使其看起來像是強勁的拋售。在香港,約有一半公司的市盈率低於9倍,甚至市盈率低於5倍也很常見。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之高。
有鑑於此,令人震驚的是,Infinity Logistics and Transport Ventures的市盈率高於其他大多數公司。顯然,該公司的許多投資者比最近所表示的要看漲得多,他們不願意以任何價格拋售股票。只有最大膽的人才會假設這些價格是可持續的,因爲近期盈利趨勢的延續最終可能會嚴重壓制股價。
關鍵要點
股價的大幅下跌並沒有減輕Infinity Logistics and Transport Ventures非常高的市盈率。僅使用市盈率來確定是否應該出售股票是不明智的,但它可以作爲公司未來前景的實用指南。
我們對Infinity Logistics and Transport Ventures的審查顯示,鑑於市場即將增長,其中期收益萎縮對其高市盈率的影響並沒有我們預期的那麼大。目前,我們對高市盈率越來越不滿意,因爲這種收益表現極不可能長期支持這種積極情緒。除非最近的中期狀況明顯改善,否則很難接受這些價格的合理性。