Beijing Capital Eco-Environment Protection Group Co., Ltd.’s (SHSE:600008) price-to-earnings (or “P/E”) ratio of 13.4x 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 34x and even P/E’s above 67x are quite common. Nonetheless, we’d need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.
Beijing Capital Eco-Environment Protection Group has been struggling lately as its earnings have declined faster than most other companies. The P/E is probably low because investors think this poor earnings performance isn’t going to improve at all. If you still like the company, you’d want its earnings trajectory to turn around before making any decisions. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.
See our latest analysis for Beijing Capital Eco-Environment Protection Group
SHSE:600008 Price to Earnings Ratio vs Industry October 24th 2024 Keen to find out how analysts think Beijing Capital Eco-Environment Protection Group’s future stacks up against the industry? In that case, our free report is a great place to start. How Is Beijing Capital Eco-Environment Protection Group’s Growth Trending?
In order to justify its P/E ratio, Beijing Capital Eco-Environment Protection Group would need to produce anemic growth that’s substantially trailing the market.
Taking a look back first, the company’s earnings per share growth last year wasn’t something to get excited about as it posted a disappointing decline of 42%. As a result, earnings from three years ago have also fallen 34% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.
Looking ahead now, EPS is anticipated to climb by 8.8% per annum during the coming three years according to the lone analyst following the company. With the market predicted to deliver 18% growth per annum, the company is positioned for a weaker earnings result.
In light of this, it’s understandable that Beijing Capital Eco-Environment Protection Group’s P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.
The Key Takeaway
Using the price-to-earnings ratio alone to determine if you should sell your stock isn’t sensible, however it can be a practical guide to the company’s future prospects.
We’ve established that Beijing Capital Eco-Environment Protection Group 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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.
Before you settle on your opinion, we’ve discovered 3 warning signs for Beijing Capital Eco-Environment Protection Group (1 shouldn’t be ignored!) that you should be aware of.
It’s important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).
Discover if Beijing Capital Eco-Environment Protection Group might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.