Some Jiangsu Teeyer Intelligent Equipment Co.,Ltd. (SHSE:603273) Shareholders Look For Exit As Shares Take 26% Pounding

To the annoyance of some shareholders, Jiangsu Teeyer Intelligent Equipment Co.,Ltd. (SHSE:603273) shares are down a considerable 26% in the last month, which continues a horrid run for the company. Longer-term shareholders will rue the drop in the share price, since it's now virtually flat for the year after a promising few quarters.

Even after such a large drop in price, Jiangsu Teeyer Intelligent EquipmentLtd may still be sending very bearish signals at the moment with a price-to-earnings (or "P/E") ratio of 68.1x, since almost half of all companies in China have P/E ratios under 30x and even P/E's lower than 18x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so lofty.

As an illustration, earnings have deteriorated at Jiangsu Teeyer Intelligent EquipmentLtd over the last year, which is not ideal at all. 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.

See our latest analysis for Jiangsu Teeyer Intelligent EquipmentLtd

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How Is Jiangsu Teeyer Intelligent EquipmentLtd's Growth Trending?

There's an inherent assumption that a company should far outperform the market for P/E ratios like Jiangsu Teeyer Intelligent EquipmentLtd'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 28%. The last three years don't look nice either as the company has shrunk EPS by 33% in aggregate. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Weighing that medium-term earnings trajectory against the broader market's one-year forecast for expansion of 38% shows it's an unpleasant look.

With this information, we find it concerning that Jiangsu Teeyer Intelligent EquipmentLtd 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 Jiangsu Teeyer Intelligent EquipmentLtd's P/E

A significant share price dive has done very little to deflate Jiangsu Teeyer Intelligent EquipmentLtd's very lofty P/E. 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.

Our examination of Jiangsu Teeyer Intelligent EquipmentLtd revealed its shrinking earnings over the medium-term aren't impacting its high P/E anywhere near as much as we would have predicted, given the market is set to grow. Right now we are increasingly uncomfortable with the high P/E as this earnings performance is highly unlikely to support such positive sentiment for long. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these prices as being reasonable.

Before you settle on your opinion, we've discovered 1 warning sign for Jiangsu Teeyer Intelligent EquipmentLtd that you should be aware of.

If you're unsure about the strength of Jiangsu Teeyer Intelligent EquipmentLtd's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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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.