To the annoyance of some shareholders, Hymson Laser Technology Group Co.,Ltd. (SHSE:688559) shares are down a considerable 27% in the last month, which continues a horrid run for the company. For any long-term shareholders, the last month ends a year to forget by locking in a 61% share price decline.

Following the heavy fall in price, Hymson Laser Technology GroupLtd's price-to-earnings (or "P/E") ratio of 11.1x might make it look like a strong buy right now compared to the market in China, where around half of the companies have P/E ratios above 28x and even P/E's above 50x 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 limited.

Hymson Laser Technology GroupLtd certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. 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.

How Is Hymson Laser Technology GroupLtd's Growth Trending?

Hymson Laser Technology GroupLtd's P/E ratio would be typical for a company that's expected to deliver very poor growth or even falling earnings, and importantly, perform much worse than the market.

If we review the last year of earnings growth, the company posted a terrific increase of 60%. The strong recent performance means it was also able to grow EPS by 331% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Shifting to the future, estimates from the three analysts covering the company suggest earnings should grow by 43% over the next year. Meanwhile, the rest of the market is forecast to expand by 41%, which is not materially different.

In light of this, it's peculiar that Hymson Laser Technology GroupLtd's P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

What We Can Learn From Hymson Laser Technology GroupLtd's P/E?

Hymson Laser Technology GroupLtd's P/E looks about as weak as its stock price lately. 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.

Our examination of Hymson Laser Technology GroupLtd's analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see an average earnings outlook with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

You need to take note of risks, for example - Hymson Laser Technology GroupLtd has 3 warning signs (and 2 which are concerning) we think you should know about.

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.

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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.