Xuzhou Handler Special Vehicle Co., Ltd (SZSE:300201) Looks Inexpensive After Falling 27% But Perhaps Not Attractive Enough

Xuzhou Handler Special Vehicle Co., Ltd (SZSE:300201) shares have retraced a considerable 27% in the last month, reversing a fair amount of their solid recent performance. Indeed, the recent drop has reduced its annual gain to a relatively sedate 3.6% over the last twelve months.

Although its price has dipped substantially, Xuzhou Handler Special Vehicle may still be sending bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 22.4x, since almost half of all companies in China have P/E ratios greater than 33x and even P/E's higher than 63x are not unusual. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Recent times have been quite advantageous for Xuzhou Handler Special Vehicle as its earnings have been rising very briskly. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If that doesn't eventuate, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

See our latest analysis for Xuzhou Handler Special Vehicle

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Xuzhou Handler Special Vehicle's earnings, revenue and cash flow.

How Is Xuzhou Handler Special Vehicle's Growth Trending?

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

If we review the last year of earnings growth, the company posted a terrific increase of 53%. However, the latest three year period hasn't been as great in aggregate as it didn't manage to provide any growth at all. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Comparing that to the market, which is predicted to deliver 38% growth in the next 12 months, the company's momentum is weaker based on recent medium-term annualised earnings results.

In light of this, it's understandable that Xuzhou Handler Special Vehicle's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

The Final Word

Xuzhou Handler Special Vehicle's P/E has taken a tumble along with its share price. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that Xuzhou Handler Special Vehicle maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Before you take the next step, you should know about the 2 warning signs for Xuzhou Handler Special Vehicle that we have uncovered.

You might be able to find a better investment than Xuzhou Handler Special Vehicle. 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).

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.