Lizhong Sitong Light Alloys Group Co., Ltd.'s (SZSE:300428) Business And Shares Still Trailing The Market

When close to half the companies in China have price-to-earnings ratios (or "P/E's") above 29x, you may consider Lizhong Sitong Light Alloys Group Co., Ltd. (SZSE:300428) as an attractive investment with its 15.3x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's limited.

With earnings growth that's superior to most other companies of late, Lizhong Sitong Light Alloys Group has been doing relatively well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. 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 Lizhong Sitong Light Alloys Group

Want the full picture on analyst estimates for the company? Then our free report on Lizhong Sitong Light Alloys Group will help you uncover what's on the horizon.

How Is Lizhong Sitong Light Alloys Group's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as low as Lizhong Sitong Light Alloys Group's is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered an exceptional 58% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 47% in total over the last three years. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 16% each year during the coming three years according to the six analysts following the company. That's shaping up to be materially lower than the 25% per annum growth forecast for the broader market.

With this information, we can see why Lizhong Sitong Light Alloys Group 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 Key Takeaway

While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

As we suspected, our examination of Lizhong Sitong Light Alloys Group'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.

Before you take the next step, you should know about the 1 warning sign for Lizhong Sitong Light Alloys Group that we have uncovered.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on a low P/E.

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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