CIMC Safeway Technologies Co., Ltd.'s (SZSE:301559) Popularity With Investors Is Clear

It's not a stretch to say that CIMC Safeway Technologies Co., Ltd.'s (SZSE:301559) price-to-earnings (or "P/E") ratio of 37.3x right now seems quite "middle-of-the-road" compared to the market in China, where the median P/E ratio is around 36x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

Recent times haven't been advantageous for CIMC Safeway Technologies as its earnings have been falling quicker than most other companies. One possibility is that the P/E is moderate because investors think the company's earnings trend will eventually fall in line with most others in the market. You'd much rather the company wasn't bleeding earnings if you still believe in the business. Or at the very least, you'd be hoping it doesn't keep underperforming if your plan is to pick up some stock while it's not in favour.

See our latest analysis for CIMC Safeway Technologies

Keen to find out how analysts think CIMC Safeway Technologies' future stacks up against the industry? In that case, our free report is a great place to start.

How Is CIMC Safeway Technologies' Growth Trending?

In order to justify its P/E ratio, CIMC Safeway Technologies would need to produce growth that's similar to the market.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 61%. This means it has also seen a slide in earnings over the longer-term as EPS is down 30% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Shifting to the future, estimates from the two analysts covering the company suggest earnings should grow by 36% over the next year. That's shaping up to be similar to the 38% growth forecast for the broader market.

In light of this, it's understandable that CIMC Safeway Technologies' P/E sits in line with the majority of other companies. It seems most investors are expecting to see average future growth and are only willing to pay a moderate amount for the stock.

The Final Word

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 CIMC Safeway Technologies maintains its moderate P/E off the back of its forecast growth being in line with the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings won't throw up any surprises. It's hard to see the share price moving strongly in either direction in the near future under these circumstances.

Before you take the next step, you should know about the 1 warning sign for CIMC Safeway Technologies that we have uncovered.

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).

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.