The Market Doesn't Like What It Sees From Tasly Pharmaceutical Group Co., Ltd's (SHSE:600535) Earnings Yet

When close to half the companies in China have price-to-earnings ratios (or "P/E's") above 33x, you may consider Tasly Pharmaceutical Group Co., Ltd (SHSE:600535) as an attractive investment with its 21.2x 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, Tasly Pharmaceutical 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.

View our latest analysis for Tasly Pharmaceutical Group

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Tasly Pharmaceutical Group.

Is There Any Growth For Tasly Pharmaceutical Group?

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

Retrospectively, the last year delivered an exceptional 94% gain to the company's bottom line. However, this wasn't enough as the latest three year period has seen a very unpleasant 4.2% drop in EPS in aggregate. 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 10% each year as estimated by the seven analysts watching the company. Meanwhile, the rest of the market is forecast to expand by 26% per annum, which is noticeably more attractive.

In light of this, it's understandable that Tasly Pharmaceutical Group's P/E sits below the majority of other companies. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Final Word

Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

As we suspected, our examination of Tasly Pharmaceutical 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. It's hard to see the share price rising strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 1 warning sign for Tasly Pharmaceutical Group you should be aware of.

You might be able to find a better investment than Tasly Pharmaceutical Group. If you want a selection of possible candidates, check out this free list of interesting companies that trade on a low P/E (but have proven they can grow earnings).

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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.