Some Sino-High (China) Co., Ltd. (SZSE:301076) Shareholders Look For Exit As Shares Take 28% Pounding

Sino-High (China) Co., Ltd. (SZSE:301076) shareholders that were waiting for something to happen have been dealt a blow with a 28% share price drop in the last month. The recent drop has obliterated the annual return, with the share price now down 4.2% over that longer period.

In spite of the heavy fall in price, it's still not a stretch to say that Sino-High (China)'s price-to-earnings (or "P/E") ratio of 30.3x right now seems quite "middle-of-the-road" compared to the market in China, where the median P/E ratio is around 30x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/E.

As an illustration, earnings have deteriorated at Sino-High (China) over the last year, which is not ideal at all. One possibility is that the P/E is moderate because investors think the company might still do enough to be in line with the broader market in the near future. If not, then existing shareholders may be a little nervous about the viability of the share price.

Check out our latest analysis for Sino-High (China)

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Sino-High (China) will help you shine a light on its historical performance.

How Is Sino-High (China)'s Growth Trending?

There's an inherent assumption that a company should be matching the market for P/E ratios like Sino-High (China)'s to be considered reasonable.

Retrospectively, the last year delivered a frustrating 14% decrease to the company's bottom line. The last three years don't look nice either as the company has shrunk EPS by 2.3% in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

In contrast to the company, the rest of the market is expected to grow by 36% over the next year, which really puts the company's recent medium-term earnings decline into perspective.

In light of this, it's somewhat alarming that Sino-High (China)'s P/E sits in line with the majority of other companies. Apparently many investors in the company are way less bearish than recent times would indicate and aren't willing to let go of their stock right now. There's a good chance existing shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the recent negative growth rates.

The Bottom Line On Sino-High (China)'s P/E

Following Sino-High (China)'s share price tumble, its P/E is now hanging on to the median market P/E. 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 Sino-High (China) currently trades on a higher than expected P/E since its recent earnings have been in decline over the medium-term. Right now we are uncomfortable with the P/E as this earnings performance is unlikely to support a more positive sentiment for long. If recent medium-term earnings trends continue, it will place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

And what about other risks? Every company has them, and we've spotted 3 warning signs for Sino-High (China) (of which 2 make us uncomfortable!) you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and 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.