Fewer Investors Than Expected Jumping On Hoshine Silicon Industry Co., Ltd. (SHSE:603260)

When close to half the companies in China have price-to-earnings ratios (or "P/E's") above 31x, you may consider Hoshine Silicon Industry Co., Ltd. (SHSE:603260) as an attractive investment with its 26x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

While the market has experienced earnings growth lately, Hoshine Silicon Industry's earnings have gone into reverse gear, which is not great. It seems that many are expecting the dour earnings performance to persist, which has repressed the P/E. If you still 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.

Check out our latest analysis for Hoshine Silicon Industry

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Hoshine Silicon Industry.

How Is Hoshine Silicon Industry's Growth Trending?

In order to justify its P/E ratio, Hoshine Silicon Industry would need to produce sluggish growth that's trailing 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 51%. As a result, earnings from three years ago have also fallen 17% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Turning to the outlook, the next three years should generate growth of 35% per year as estimated by the seven analysts watching the company. That's shaping up to be materially higher than the 25% per annum growth forecast for the broader market.

In light of this, it's peculiar that Hoshine Silicon Industry's P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Hoshine Silicon Industry currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

We don't want to rain on the parade too much, but we did also find 4 warning signs for Hoshine Silicon Industry (2 are a bit concerning!) that you need to be mindful of.

Of course, you might also be able to find a better stock than Hoshine Silicon Industry. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.

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