Little Excitement Around Marssenger Kitchenware Co., Ltd.'s (SZSE:300894) Earnings As Shares Take 28% Pounding

The Marssenger Kitchenware Co., Ltd. (SZSE:300894) share price has softened a substantial 28% over the previous 30 days, handing back much of the gains the stock has made lately. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 44% in that time.

Although its price has dipped substantially, given about half the companies in China have price-to-earnings ratios (or "P/E's") above 30x, you may still consider Marssenger Kitchenware as an attractive investment with its 25.4x P/E ratio. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

While the market has experienced earnings growth lately, Marssenger Kitchenware's earnings have gone into reverse gear, which is not great. 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.

See our latest analysis for Marssenger Kitchenware

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

Is There Any Growth For Marssenger Kitchenware?

Marssenger Kitchenware's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

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 23%. The last three years don't look nice either as the company has shrunk EPS by 39% in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Turning to the outlook, the next three years should generate growth of 16% each year as estimated by the eight analysts watching the company. With the market predicted to deliver 25% growth each year, the company is positioned for a weaker earnings result.

With this information, we can see why Marssenger Kitchenware 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 Key Takeaway

The softening of Marssenger Kitchenware's shares means its P/E is now sitting at a pretty low level. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

As we suspected, our examination of Marssenger Kitchenware'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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You always need to take note of risks, for example - Marssenger Kitchenware has 2 warning signs we think you should be aware of.

Of course, you might also be able to find a better stock than Marssenger Kitchenware. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.

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