When close to half the companies in China have price-to-earnings ratios (or "P/E's") above 27x, you may consider Chinese Universe Publishing and Media Group Co., Ltd. (SHSE:600373) as a highly attractive investment with its 9.4x P/E ratio. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

Recent times have been pleasing for Chinese Universe Publishing and Media Group as its earnings have risen in spite of the market's earnings going into reverse. 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 not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Is There Any Growth For Chinese Universe Publishing and Media Group?

The only time you'd be truly comfortable seeing a P/E as depressed as Chinese Universe Publishing and Media Group's is when the company's growth is on track to lag the market decidedly.

Retrospectively, the last year delivered an exceptional 27% gain to the company's bottom line. As a result, it also grew EPS by 16% in total over the last three years. So we can start by confirming that the company has actually done a good job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 2.2% each year during the coming three years according to the three analysts following the company. With the market predicted to deliver 19% growth per annum, the company is positioned for a weaker earnings result.

With this information, we can see why Chinese Universe Publishing and Media Group is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Final Word

While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

As we suspected, our examination of Chinese Universe Publishing and Media Group's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Chinese Universe Publishing and Media Group that you should be aware of.

Of course, you might also be able to find a better stock than Chinese Universe Publishing and Media Group. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.