Insufficient Growth At CITIC Securities Company Limited (SHSE:600030) Hampers Share Price

When close to half the companies in China have price-to-earnings ratios (or "P/E's") above 28x, you may consider CITIC Securities Company Limited (SHSE:600030) as an attractive investment with its 17.1x 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.

With earnings that are retreating more than the market's of late, CITIC Securities has been very sluggish. 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. Or at the very least, you'd be hoping the earnings slide doesn't get any worse if your plan is to pick up some stock while it's out of favour.

See our latest analysis for CITIC Securities

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

Is There Any Growth For CITIC Securities?

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

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 12%. As a result, earnings from three years ago have also fallen 12% overall. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Looking ahead now, EPS is anticipated to climb by 7.8% per year during the coming three years according to the analysts following the company. That's shaping up to be materially lower than the 19% per annum growth forecast for the broader market.

With this information, we can see why CITIC Securities 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.

What We Can Learn From CITIC Securities' P/E?

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 CITIC Securities' analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

It is also worth noting that we have found 1 warning sign for CITIC Securities that you need to take into consideration.

If you're unsure about the strength of CITIC Securities' 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.