Tian Lun Gas Holdings Limited (HKG:1600) shareholders that were waiting for something to happen have been dealt a blow with a 28% share price drop in the last month. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 35% in that time.

Although its price has dipped substantially, Tian Lun Gas Holdings may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 6.6x, since almost half of all companies in Hong Kong have P/E ratios greater than 10x and even P/E's higher than 19x are not unusual. 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 have been advantageous for Tian Lun Gas Holdings as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Is There Any Growth For Tian Lun Gas Holdings?

In order to justify its P/E ratio, Tian Lun Gas Holdings would need to produce sluggish growth that's trailing the market.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 9.4% last year. However, this wasn't enough as the latest three year period has seen an unpleasant 53% overall drop in EPS. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Looking ahead now, EPS is anticipated to climb by 14% per year during the coming three years according to the dual analysts following the company. With the market predicted to deliver 16% growth each year, the company is positioned for a comparable earnings result.

With this information, we find it odd that Tian Lun Gas Holdings 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 Tian Lun Gas Holdings' P/E

Tian Lun Gas Holdings' recently weak share price has pulled its P/E below most other companies. 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 Tian Lun Gas Holdings' analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. There could be some unobserved threats to earnings preventing the P/E ratio from matching the outlook. It appears some are indeed anticipating earnings instability, because these conditions should normally provide more support to the share price.

And what about other risks? Every company has them, and we've spotted 2 warning signs for Tian Lun Gas Holdings (of which 1 is a bit concerning!) you should know about.

If these risks are making you reconsider your opinion on Tian Lun Gas Holdings, 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