Little Excitement Around Harbin Electric Corporation Jiamusi Electric Machine CO.,Ltd's (SZSE:000922) Earnings

With a price-to-earnings (or "P/E") ratio of 19.3x Harbin Electric Corporation Jiamusi Electric Machine CO.,Ltd (SZSE:000922) may be sending bullish signals at the moment, given that almost half of all companies in China have P/E ratios greater than 29x and even P/E's higher than 55x 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 limited.

Harbin Electric Corporation Jiamusi Electric MachineLtd could be doing better as its earnings have been going backwards lately while most other companies have been seeing positive earnings growth. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If this is the case, then existing shareholders will probably struggle to get excited about the future direction of the share price.

Check out our latest analysis for Harbin Electric Corporation Jiamusi Electric MachineLtd

Keen to find out how analysts think Harbin Electric Corporation Jiamusi Electric MachineLtd's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Harbin Electric Corporation Jiamusi Electric MachineLtd's Growth Trending?

In order to justify its P/E ratio, Harbin Electric Corporation Jiamusi Electric MachineLtd would need to produce sluggish growth that's trailing the market.

Retrospectively, the last year delivered a frustrating 7.3% decrease to the company's bottom line. This means it has also seen a slide in earnings over the longer-term as EPS is down 7.3% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 20% each year during the coming three years according to the three analysts following the company. With the market predicted to deliver 24% growth each year, the company is positioned for a weaker earnings result.

With this information, we can see why Harbin Electric Corporation Jiamusi Electric MachineLtd is trading at a P/E lower than the market. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

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.

As we suspected, our examination of Harbin Electric Corporation Jiamusi Electric MachineLtd'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. It's hard to see the share price rising strongly in the near future under these circumstances.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Harbin Electric Corporation Jiamusi Electric MachineLtd that you need to be mindful 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).

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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.

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