Pangang Group Vanadium & Titanium Resources Co., Ltd.'s (SZSE:000629) Price In Tune With Earnings

When close to half the companies in China have price-to-earnings ratios (or "P/E's") below 31x, you may consider Pangang Group Vanadium & Titanium Resources Co., Ltd. (SZSE:000629) as a stock to avoid entirely with its 67.5x P/E ratio. However, the P/E might be quite high for a reason and it requires further investigation to determine if it's justified.

Recent times haven't been advantageous for Pangang Group Vanadium & Titanium Resources as its earnings have been falling quicker than most other companies. One possibility is that the P/E is high because investors think the company will turn things around completely and accelerate past most others in the market. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Pangang Group Vanadium & Titanium Resources

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Pangang Group Vanadium & Titanium Resources.

Is There Enough Growth For Pangang Group Vanadium & Titanium Resources?

Pangang Group Vanadium & Titanium Resources' P/E ratio would be typical for a company that's expected to deliver very strong growth, and importantly, perform much better than the market.

Retrospectively, the last year delivered a frustrating 64% decrease to the company's bottom line. As a result, earnings from three years ago have also fallen 74% overall. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 123% during the coming year according to the three analysts following the company. Meanwhile, the rest of the market is forecast to only expand by 38%, which is noticeably less attractive.

With this information, we can see why Pangang Group Vanadium & Titanium Resources is trading at such a high P/E compared to the market. It seems most investors are expecting this strong future growth and are willing to pay more for the stock.

The Final Word

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.

We've established that Pangang Group Vanadium & Titanium Resources maintains its high P/E on the strength of its forecast growth being higher than the wider market, as expected. Right now shareholders are comfortable with the P/E as they are quite confident future earnings aren't under threat. It's hard to see the share price falling strongly in the near future under these circumstances.

Plus, you should also learn about this 1 warning sign we've spotted with Pangang Group Vanadium & Titanium Resources.

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.