Chifeng Jilong Gold Mining Co.,Ltd.'s (SHSE:600988) Shares Not Telling The Full Story

With a price-to-earnings (or "P/E") ratio of 27x Chifeng Jilong Gold Mining Co.,Ltd. (SHSE:600988) may be sending bullish signals at the moment, given that almost half of all companies in China have P/E ratios greater than 33x and even P/E's higher than 64x 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.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Chifeng Jilong Gold MiningLtd has been doing quite well of late. 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 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.

See our latest analysis for Chifeng Jilong Gold MiningLtd

Keen to find out how analysts think Chifeng Jilong Gold MiningLtd's future stacks up against the industry? In that case, our free report is a great place to start.

How Is Chifeng Jilong Gold MiningLtd's Growth Trending?

Chifeng Jilong Gold MiningLtd's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 245% last year. EPS has also lifted 22% in aggregate from three years ago, mostly thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been respectable for the company.

Looking ahead now, EPS is anticipated to climb by 22% per year during the coming three years according to the eight analysts following the company. That's shaping up to be materially higher than the 18% each year growth forecast for the broader market.

With this information, we find it odd that Chifeng Jilong Gold MiningLtd is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Key Takeaway

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

Our examination of Chifeng Jilong Gold MiningLtd's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. 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.

A lot of potential risks can sit within a company's balance sheet. Our free balance sheet analysis for Chifeng Jilong Gold MiningLtd with six simple checks will allow you to discover any risks that could be an issue.

If you're unsure about the strength of Chifeng Jilong Gold MiningLtd'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.