Those holding Colour Life Services Group Co., Limited (HKG:1778) shares would be relieved that the share price has rebounded 26% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Longer-term shareholders would be thankful for the recovery in the share price since it's now virtually flat for the year after the recent bounce.
Since its price has surged higher, Colour Life Services Group may be sending bearish signals at the moment with its price-to-earnings (or "P/E") ratio of 13x, since almost half of all companies in Hong Kong have P/E ratios under 9x and even P/E's lower than 5x are not unusual. However, the P/E might be high for a reason and it requires further investigation to determine if it's justified.
For instance, Colour Life Services Group's receding earnings in recent times would have to be some food for thought. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.
SEHK:1778 Price to Earnings Ratio vs Industry June 7th 2024 We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Colour Life Services Group's earnings, revenue and cash flow.
Does Growth Match The High P/E?
Colour Life Services Group's P/E ratio would be typical for a company that's expected to deliver solid growth, and importantly, perform better than the market.
If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 27%. The last three years don't look nice either as the company has shrunk EPS by 96% in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.
Comparing that to the market, which is predicted to deliver 20% growth in the next 12 months, the company's downward momentum based on recent medium-term earnings results is a sobering picture.
With this information, we find it concerning that Colour Life Services Group is trading at a P/E higher than the market. It seems most investors are ignoring the recent poor growth rate and are hoping for a turnaround in the company's business prospects. There's a very good chance existing shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the recent negative growth rates.
The Bottom Line On Colour Life Services Group's P/E
Colour Life Services Group shares have received a push in the right direction, but its P/E is elevated too. 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.
We've established that Colour Life Services Group currently trades on a much higher than expected P/E since its recent earnings have been in decline over the medium-term. When we see earnings heading backwards and underperforming the market forecasts, we suspect the share price is at risk of declining, sending the high P/E lower. If recent medium-term earnings trends continue, it will place shareholders' investments at significant risk and potential investors in danger of paying an excessive premium.
It is also worth noting that we have found 5 warning signs for Colour Life Services Group (1 is a bit unpleasant!) that you need to take into consideration.
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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持有Colour Life Services Group Co., Limited(HKG: 1778)股票的人會鬆一口氣,因爲股價在過去三十天中反彈了26%,但它需要繼續修復最近對投資者投資組合造成的損失。長期股東將對股價的回升表示感謝,因爲在最近的反彈之後的一年中,股價幾乎持平。
由於其價格飆升,Colour Life Services Group目前可能以13倍的市盈率(或 “市盈率”)發出看跌信號,因爲幾乎一半的香港公司的市盈率低於9倍,即使市盈率低於5倍也並不罕見。但是,市盈率之高可能是有原因的,需要進一步調查以確定其是否合理。
例如,Color Life Services Group最近收益的下降值得深思。許多人可能預計,在未來一段時間內,該公司的表現仍將超過大多數其他公司,這阻止了市盈率的暴跌。你真的希望如此,否則你會無緣無故地付出相當大的代價。