Benign Growth For Jiangsu Financial Leasing Co., Ltd. (SHSE:600901) Underpins Its Share Price

With a price-to-earnings (or "P/E") ratio of 10.3x Jiangsu Financial Leasing Co., Ltd. (SHSE:600901) may be sending very bullish signals at the moment, given that almost half of all companies in China have P/E ratios greater than 38x and even P/E's higher than 73x are not unusual. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

Recent times have been pleasing for Jiangsu Financial Leasing as its earnings have risen in spite of the market's earnings going into reverse. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, which has repressed the P/E. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

See our latest analysis for Jiangsu Financial Leasing

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

Is There Any Growth For Jiangsu Financial Leasing?

There's an inherent assumption that a company should far underperform the market for P/E ratios like Jiangsu Financial Leasing's to be considered reasonable.

Retrospectively, the last year delivered a decent 6.7% gain to the company's bottom line. However, due to its less than impressive performance prior to this period, EPS growth is practically non-existent over the last three years overall. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Looking ahead now, EPS is anticipated to slump, contracting by 19% during the coming year according to the six analysts following the company. Meanwhile, the broader market is forecast to expand by 37%, which paints a poor picture.

In light of this, it's understandable that Jiangsu Financial Leasing's P/E would sit below the majority of other companies. Nonetheless, there's no guarantee the P/E has reached a floor yet with earnings going in reverse. Even just maintaining these prices could be difficult to achieve as the weak outlook is weighing down the shares.

What We Can Learn From Jiangsu Financial Leasing's 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 Jiangsu Financial Leasing's analyst forecasts revealed that its outlook for shrinking earnings 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.

Plus, you should also learn about these 3 warning signs we've spotted with Jiangsu Financial Leasing (including 2 which can't be ignored).

You might be able to find a better investment than Jiangsu Financial Leasing. 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).

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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.