Pingdingshan Tianan Coal. Mining Co., Ltd. (SHSE:601666) Shares Fly 28% But Investors Aren't Buying For Growth

The Pingdingshan Tianan Coal. Mining Co., Ltd. (SHSE:601666) share price has done very well over the last month, posting an excellent gain of 28%. Looking further back, the 25% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

In spite of the firm bounce in price, Pingdingshan Tianan Coal. Mining may still be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 8.2x, since almost half of all companies in China have P/E ratios greater than 31x and even P/E's higher than 56x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

With earnings that are retreating more than the market's of late, Pingdingshan Tianan Coal. Mining has been very sluggish. It seems that many are expecting the dismal earnings performance to persist, which has repressed the P/E. If you still like the company, you'd want its earnings trajectory to turn around before making any decisions. 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.

Check out our latest analysis for Pingdingshan Tianan Coal. Mining

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

Is There Any Growth For Pingdingshan Tianan Coal. Mining?

Pingdingshan Tianan Coal. Mining's P/E ratio would be typical for a company that's expected to deliver very poor growth or even falling earnings, and importantly, perform much 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 29%. However, a few very strong years before that means that it was still able to grow EPS by an impressive 214% in total over the last three years. So we can start by confirming that the company has generally done a very good job of growing earnings over that time, even though it had some hiccups along the way.

Turning to the outlook, the next year should generate growth of 2.2% as estimated by the five analysts watching the company. With the market predicted to deliver 42% growth , the company is positioned for a weaker earnings result.

In light of this, it's understandable that Pingdingshan Tianan Coal. Mining's P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Pingdingshan Tianan Coal. Mining's P/E

Even after such a strong price move, Pingdingshan Tianan Coal. Mining's P/E still trails the rest of the market significantly. 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 Pingdingshan Tianan Coal. Mining maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

You should always think about risks. Case in point, we've spotted 1 warning sign for Pingdingshan Tianan Coal. Mining you should be aware of.

If you're unsure about the strength of Pingdingshan Tianan Coal. Mining's 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.