J.S. Corrugating Machinery Co., Ltd. (SZSE:000821) shares have had a horrible month, losing 25% after a relatively good period beforehand. For any long-term shareholders, the last month ends a year to forget by locking in a 53% share price decline.

Since its price has dipped substantially, J.S. Corrugating Machinery's price-to-earnings (or "P/E") ratio of 19.1x might make it look like a buy right now compared to the market in China, where around half of the companies have P/E ratios above 27x and even P/E's above 48x 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 limited.

With its earnings growth in positive territory compared to the declining earnings of most other companies, J.S. Corrugating Machinery has been doing quite well of late. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, 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.

How Is J.S. Corrugating Machinery's Growth Trending?

In order to justify its P/E ratio, J.S. Corrugating Machinery would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered an exceptional 99% gain to the company's bottom line. Although, its longer-term performance hasn't been as strong with three-year EPS growth being relatively non-existent overall. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 35% during the coming year according to the lone analyst following the company. With the market predicted to deliver 41% growth , the company is positioned for a weaker earnings result.

With this information, we can see why J.S. Corrugating Machinery is trading at a P/E lower than the market. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On J.S. Corrugating Machinery's P/E

J.S. Corrugating Machinery's 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.

We've established that J.S. Corrugating Machinery maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.

You always need to take note of risks, for example - J.S. Corrugating Machinery has 1 warning sign we think you should be aware of.

If these risks are making you reconsider your opinion on J.S. Corrugating Machinery, 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.