Investors Aren't Buying AIMA Technology Group CO., LTD's (SHSE:603529) Earnings

When close to half the companies in China have price-to-earnings ratios (or "P/E's") above 28x, you may consider AIMA Technology Group CO., LTD (SHSE:603529) as a highly attractive investment with its 12.7x 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.

AIMA Technology Group could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. The P/E is probably low because investors think this poor earnings performance isn't going to get any better. If you still 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.

View our latest analysis for AIMA Technology Group

If you'd like to see what analysts are forecasting going forward, you should check out our free report on AIMA Technology Group.

Does Growth Match The Low P/E?

There's an inherent assumption that a company should far underperform the market for P/E ratios like AIMA Technology Group's to be considered reasonable.

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 6.8%. However, a few very strong years before that means that it was still able to grow EPS by an impressive 149% in total over the last three years. Accordingly, while they would have preferred to keep the run going, shareholders would probably welcome the medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 16% per annum as estimated by the eight analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 24% each year, which is noticeably more attractive.

In light of this, it's understandable that AIMA Technology 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 Bottom Line On AIMA Technology Group's P/E

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 AIMA Technology 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. It's hard to see the share price rising strongly in the near future under these circumstances.

It is also worth noting that we have found 1 warning sign for AIMA Technology Group that you need to take into consideration.

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).

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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.