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- SHSE:600968
CNOOC Energy Technology & Services Limited's (SHSE:600968) Prospects Need A Boost To Lift Shares
CNOOC Energy Technology & Services Limited's (SHSE:600968) price-to-earnings (or "P/E") ratio of 11.6x might make it look like a strong buy right now compared to the market in China, where around half of the companies have P/E ratios above 37x and even P/E's above 73x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.
With its earnings growth in positive territory compared to the declining earnings of most other companies, CNOOC Energy Technology & Services has been doing quite well of late. 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.
View our latest analysis for CNOOC Energy Technology & Services
If you'd like to see what analysts are forecasting going forward, you should check out our free report on CNOOC Energy Technology & Services.Does Growth Match The Low P/E?
There's an inherent assumption that a company should far underperform the market for P/E ratios like CNOOC Energy Technology & Services' to be considered reasonable.
Retrospectively, the last year delivered an exceptional 33% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 103% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.
Looking ahead now, EPS is anticipated to climb by 14% during the coming year according to the five analysts following the company. Meanwhile, the rest of the market is forecast to expand by 39%, which is noticeably more attractive.
With this information, we can see why CNOOC Energy Technology & Services is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.
The Final Word
While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.
We've established that CNOOC Energy Technology & Services maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. It's hard to see the share price rising strongly in the near future under these circumstances.
A lot of potential risks can sit within a company's balance sheet. Take a look at our free balance sheet analysis for CNOOC Energy Technology & Services with six simple checks on some of these key factors.
If these risks are making you reconsider your opinion on CNOOC Energy Technology & Services, explore our interactive list of high quality stocks to get an idea of what else is out there.
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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.
About SHSE:600968
CNOOC Energy Technology & Services
Operates in the oil and gas industry in China.
Flawless balance sheet, undervalued and pays a dividend.