Byhealth Co., Ltd (SZSE:300146) Doing What It Can To Lift Shares

With a price-to-earnings (or "P/E") ratio of 28x Byhealth Co., Ltd (SZSE:300146) may be sending bullish signals at the moment, given that almost half of all companies in China have P/E ratios greater than 39x and even P/E's higher than 77x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Byhealth 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. 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 Byhealth

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How Is Byhealth's Growth Trending?

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

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 61%. As a result, earnings from three years ago have also fallen 60% overall. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Shifting to the future, estimates from the eight analysts covering the company suggest earnings should grow by 50% over the next year. Meanwhile, the rest of the market is forecast to only expand by 37%, which is noticeably less attractive.

With this information, we find it odd that Byhealth is trading at a P/E lower than the market. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Final Word

It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Byhealth currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Byhealth (1 shouldn't be ignored!) that you need to be mindful 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.

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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.