Despite an already strong run, HM International Holdings Limited (HKG:8416) shares have been powering on, with a gain of 27% in the last thirty days. Looking back a bit further, it's encouraging to see the stock is up 34% in the last year.
In spite of the firm bounce in price, you could still be forgiven for feeling indifferent about HM International Holdings' P/E ratio of 8.1x, since the median price-to-earnings (or "P/E") ratio in Hong Kong is also close to 10x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.
For instance, HM International Holdings' receding earnings in recent times would have to be some food for thought. One possibility is that the P/E is moderate because investors think the company might still do enough to be in line with the broader market in the near future. If you like the company, you'd at least be hoping this is the case so that you could potentially pick up some stock while it's not quite in favour.
SEHK:8416 Price to Earnings Ratio vs Industry May 21st 2024 We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on HM International Holdings' earnings, revenue and cash flow.
What Are Growth Metrics Telling Us About The P/E?
In order to justify its P/E ratio, HM International Holdings would need to produce growth that's similar to the market.
Retrospectively, the last year delivered a frustrating 12% decrease to the company's bottom line. Unfortunately, that's brought it right back to where it started three years ago with EPS growth being virtually non-existent overall during that time. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.
Comparing that to the market, which is predicted to deliver 20% growth in the next 12 months, the company's momentum is weaker based on recent medium-term annualised earnings results.
With this information, we find it interesting that HM International Holdings is trading at a fairly similar P/E to the market. It seems most investors are ignoring the fairly limited recent growth rates and are willing to pay up for exposure to the stock. They may be setting themselves up for future disappointment if the P/E falls to levels more in line with recent growth rates.
The Final Word
HM International Holdings' stock has a lot of momentum behind it lately, which has brought its P/E level with the market. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.
Our examination of HM International Holdings revealed its three-year earnings trends aren't impacting its P/E as much as we would have predicted, given they look worse than current market expectations. When we see weak earnings with slower than market growth, we suspect the share price is at risk of declining, sending the moderate P/E lower. Unless the recent medium-term conditions improve, it's challenging to accept these prices as being reasonable.
It is also worth noting that we have found 4 warning signs for HM International Holdings (1 is a bit unpleasant!) that you need to take into consideration.
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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有了這些信息,我們發現有趣的是,HM International Holdings的交易市盈率與市場相當相似。看來大多數投資者都無視近期相當有限的增長率,願意爲股票敞口付出代價。如果市盈率降至更符合近期增長率的水平,他們可能會爲未來的失望做好準備。
最後一句話
HM International Holdings的股票最近勢頭強勁,這使其市盈率與市場持平。通常,在做出投資決策時,我們謹慎行事,不要過多地解讀市盈率,儘管這可以充分揭示其他市場參與者對公司的看法。
我們對HM International Holdings的審查顯示,其三年收益趨勢對其市盈率的影響沒有我們預期的那麼大,因爲這些趨勢看起來比當前的市場預期還要糟糕。當我們看到收益疲軟且增長慢於市場增長時,我們懷疑股價有下跌的風險,從而使溫和的市盈率走低。除非最近的中期狀況有所改善,否則很難接受這些價格的合理性。