Sino-Platinum Metals Co.,Ltd's (SHSE:600459) Shares Lagging The Market But So Is The Business

Sino-Platinum Metals Co.,Ltd's (SHSE:600459) price-to-earnings (or "P/E") ratio of 22.2x might make it look like a buy right now compared to the market in China, where around half of the companies have P/E ratios above 29x and even P/E's above 53x are quite common. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the reduced P/E.

Sino-Platinum MetalsLtd certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Check out our latest analysis for Sino-Platinum MetalsLtd

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Is There Any Growth For Sino-Platinum MetalsLtd?

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

Taking a look back first, we see that the company managed to grow earnings per share by a handy 8.5% last year. Although, the latest three year period in total hasn't been as good as it didn't manage to provide any growth at all. Therefore, it's fair to say that earnings growth has been inconsistent recently for the company.

Turning to the outlook, the next year should generate growth of 19% as estimated by the two analysts watching the company. With the market predicted to deliver 41% growth , the company is positioned for a weaker earnings result.

With this information, we can see why Sino-Platinum MetalsLtd is trading at a P/E lower than the market. 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 Sino-Platinum MetalsLtd's P/E

We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

As we suspected, our examination of Sino-Platinum MetalsLtd'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.

It is also worth noting that we have found 1 warning sign for Sino-Platinum MetalsLtd that you need to take into consideration.

You might be able to find a better investment than Sino-Platinum MetalsLtd. 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.