Positive Sentiment Still Eludes XPON Technologies Group Limited (ASX:XPN) Following 34% Share Price Slump

XPON Technologies Group Limited (ASX:XPN) shareholders that were waiting for something to happen have been dealt a blow with a 34% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 50% loss during that time.

Following the heavy fall in price, given about half the companies in Australia have price-to-earnings ratios (or "P/E's") above 17x, you may consider XPON Technologies Group as a highly attractive investment with its -3.2x P/E ratio. 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.

While the market has experienced earnings growth lately, XPON Technologies Group's earnings have gone into reverse gear, which is not great. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

See our latest analysis for XPON Technologies Group

Want the full picture on analyst estimates for the company? Then our free report on XPON Technologies Group will help you uncover what's on the horizon.

Is There Any Growth For XPON Technologies Group?

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

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 1.7%. Unfortunately, that's brought it right back to where it started three years ago with EPS growth being virtually non-existent overall during that time. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Turning to the outlook, the next year should generate growth of 27% as estimated by the only analyst watching the company. With the market only predicted to deliver 13%, the company is positioned for a stronger earnings result.

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

The Final Word

Having almost fallen off a cliff, XPON Technologies Group's share price has pulled its P/E way down as well. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that XPON Technologies Group currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

Before you take the next step, you should know about the 2 warning signs for XPON Technologies Group that we have uncovered.

You might be able to find a better investment than XPON Technologies Group. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.