When close to half the companies in China have price-to-earnings ratios (or "P/E's") above 27x, you may consider Zhejiang Qianjiang Motorcycle Co., Ltd. (SZSE:000913) as an attractive investment with its 15.3x 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 limited.

Recent times haven't been advantageous for Zhejiang Qianjiang Motorcycle as its earnings have been falling quicker than most other companies. The P/E is probably low because investors think this poor earnings performance isn't going to improve at all. 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.

Is There Any Growth For Zhejiang Qianjiang Motorcycle?

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

Retrospectively, the last year delivered a frustrating 3.7% decrease to the company's bottom line. Even so, admirably EPS has lifted 59% in aggregate from three years ago, notwithstanding the last 12 months. Although it's been a bumpy ride, it's still fair to say the earnings growth recently has been more than adequate for the company.

Shifting to the future, estimates from the four analysts covering the company suggest earnings should grow by 21% each year over the next three years. Meanwhile, the rest of the market is forecast to expand by 20% per annum, which is not materially different.

With this information, we find it odd that Zhejiang Qianjiang Motorcycle is trading at a P/E lower than the market. It may be that most investors are not convinced the company can achieve future growth expectations.

The Bottom Line On Zhejiang Qianjiang Motorcycle's P/E

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.

We've established that Zhejiang Qianjiang Motorcycle currently trades on a lower than expected P/E since its forecast growth is in line with the wider market. There could be some unobserved threats to earnings preventing the P/E ratio from matching the outlook. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

And what about other risks? Every company has them, and we've spotted 1 warning sign for Zhejiang Qianjiang Motorcycle you should know about.

If you're unsure about the strength of Zhejiang Qianjiang Motorcycle's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.