Investors Holding Back On Asia-potash International Investment (Guangzhou)Co.,Ltd. (SZSE:000893)

When close to half the companies in China have price-to-earnings ratios (or "P/E's") above 29x, you may consider Asia-potash International Investment (Guangzhou)Co.,Ltd. (SZSE:000893) as an attractive investment with its 15.3x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Asia-potash International Investment (Guangzhou)Co.Ltd hasn't been tracking well recently as its declining earnings compare poorly to other companies, which have seen some growth on average. 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.

View our latest analysis for Asia-potash International Investment (Guangzhou)Co.Ltd

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Asia-potash International Investment (Guangzhou)Co.Ltd.

How Is Asia-potash International Investment (Guangzhou)Co.Ltd's Growth Trending?

There's an inherent assumption that a company should underperform the market for P/E ratios like Asia-potash International Investment (Guangzhou)Co.Ltd's to be considered reasonable.

Retrospectively, the last year delivered a frustrating 55% decrease to the company's bottom line. Even so, admirably EPS has lifted 1,003% in aggregate from three years ago, notwithstanding the last 12 months. So we can start by confirming that the company has generally done a very good job of growing earnings over that time, even though it had some hiccups along the way.

Shifting to the future, estimates from the four analysts covering the company suggest earnings should grow by 30% per annum over the next three years. With the market only predicted to deliver 24% each year, the company is positioned for a stronger earnings result.

With this information, we find it odd that Asia-potash International Investment (Guangzhou)Co.Ltd 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 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.

Our examination of Asia-potash International Investment (Guangzhou)Co.Ltd'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.

Don't forget that there may be other risks. For instance, we've identified 2 warning signs for Asia-potash International Investment (Guangzhou)Co.Ltd (1 can't be ignored) you should be aware of.

If these risks are making you reconsider your opinion on Asia-potash International Investment (Guangzhou)Co.Ltd, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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