Investors Continue Waiting On Sidelines For Harbin Jiuzhou Group Co.,Ltd. (SZSE:300040)

When close to half the companies in China have price-to-earnings ratios (or "P/E's") above 31x, you may consider Harbin Jiuzhou Group Co.,Ltd. (SZSE:300040) as an attractive investment with its 27.4x 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 limited.

Harbin Jiuzhou GroupLtd has been struggling lately as its earnings have declined faster than most other companies. It seems that many are expecting the dismal earnings performance to persist, which has repressed the P/E. You'd much rather the company wasn't bleeding earnings if you still believe in the business. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

View our latest analysis for Harbin Jiuzhou GroupLtd

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Harbin Jiuzhou GroupLtd.

How Is Harbin Jiuzhou GroupLtd's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as low as Harbin Jiuzhou GroupLtd's is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered a frustrating 52% decrease to the company's bottom line. This has soured the latest three-year period, which nevertheless managed to deliver a decent 23% overall rise in EPS. So we can start by confirming that the company has generally done a good job of growing earnings over that time, even though it had some hiccups along the way.

Turning to the outlook, the next year should generate growth of 213% as estimated by the one analyst watching the company. Meanwhile, the rest of the market is forecast to only expand by 41%, which is noticeably less attractive.

In light of this, it's peculiar that Harbin Jiuzhou GroupLtd'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 Key Takeaway

While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

Our examination of Harbin Jiuzhou GroupLtd's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

Plus, you should also learn about these 4 warning signs we've spotted with Harbin Jiuzhou GroupLtd (including 1 which is a bit concerning).

If you're unsure about the strength of Harbin Jiuzhou GroupLtd'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.