With a median price-to-earnings (or "P/E") ratio of close to 30x in China, you could be forgiven for feeling indifferent about Qingdao Haier Biomedical Co.,Ltd's (SHSE:688139) P/E ratio of 30.7x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

Qingdao Haier BiomedicalLtd could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It might be that many expect the dour earnings performance to strengthen positively, which has kept the P/E from falling. If not, then existing shareholders may be a little nervous about the viability of the share price.

How Is Qingdao Haier BiomedicalLtd's Growth Trending?

There's an inherent assumption that a company should be matching the market for P/E ratios like Qingdao Haier BiomedicalLtd's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 34% decrease to the company's bottom line. This means it has also seen a slide in earnings over the longer-term as EPS is down 44% in total over the last three years. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 26% per annum during the coming three years according to the three analysts following the company. That's shaping up to be similar to the 25% each year growth forecast for the broader market.

With this information, we can see why Qingdao Haier BiomedicalLtd is trading at a fairly similar P/E to the market. Apparently shareholders are comfortable to simply hold on while the company is keeping a low profile.

The Bottom Line On Qingdao Haier BiomedicalLtd's P/E

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Qingdao Haier BiomedicalLtd's analyst forecasts revealed that its market-matching earnings outlook is contributing to its current P/E. At this stage investors feel the potential for an improvement or deterioration in earnings isn't great enough to justify a high or low P/E ratio. It's hard to see the share price moving strongly in either direction in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 1 warning sign for Qingdao Haier BiomedicalLtd you should be aware of.

If these risks are making you reconsider your opinion on Qingdao Haier BiomedicalLtd, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com