Little Excitement Around Jiangsu Yuyue Medical Equipment & Supply Co., Ltd.'s (SZSE:002223) Earnings

With a price-to-earnings (or "P/E") ratio of 19.5x Jiangsu Yuyue Medical Equipment & Supply Co., Ltd. (SZSE:002223) may be sending bullish signals at the moment, given that almost half of all companies in China have P/E ratios greater than 37x and even P/E's higher than 73x 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 limited.

Jiangsu Yuyue Medical Equipment & Supply has been struggling lately as its earnings have declined faster than most other companies. 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. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

View our latest analysis for Jiangsu Yuyue Medical Equipment & Supply

Keen to find out how analysts think Jiangsu Yuyue Medical Equipment & Supply's future stacks up against the industry? In that case, our free report is a great place to start.

Does Growth Match The Low P/E?

The only time you'd be truly comfortable seeing a P/E as low as Jiangsu Yuyue Medical Equipment & Supply's 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 35%. Regardless, EPS has managed to lift by a handy 8.1% in aggregate from three years ago, thanks to the earlier period of growth. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 32% during the coming year according to the eleven analysts following the company. That's shaping up to be materially lower than the 38% growth forecast for the broader market.

In light of this, it's understandable that Jiangsu Yuyue Medical Equipment & Supply's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Bottom Line On Jiangsu Yuyue Medical Equipment & Supply's P/E

Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

As we suspected, our examination of Jiangsu Yuyue Medical Equipment & Supply'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 - Jiangsu Yuyue Medical Equipment & Supply has 1 warning sign we think you should be aware of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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

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.