Stock Analysis

Hanshang Group Co., Ltd.'s (SHSE:600774) Shares Bounce 26% But Its Business Still Trails The Market

SHSE:600774
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Those holding Hanshang Group Co., Ltd. (SHSE:600774) shares would be relieved that the share price has rebounded 26% in the last thirty days, but it needs to keep going to repair the recent damage it has caused to investor portfolios. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 32% over that time.

In spite of the firm bounce in price, Hanshang Group's price-to-earnings (or "P/E") ratio of 27x might still make it look like a buy right now compared to the market in China, where around half of the companies have P/E ratios above 31x and even P/E's above 56x are quite common. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

It looks like earnings growth has deserted Hanshang Group recently, which is not something to boast about. It might be that many expect the uninspiring earnings performance to worsen, which has repressed the P/E. If you 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.

Check out our latest analysis for Hanshang Group

pe-multiple-vs-industry
SHSE:600774 Price to Earnings Ratio vs Industry March 5th 2024
Although there are no analyst estimates available for Hanshang Group, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

Does Growth Match The Low P/E?

In order to justify its P/E ratio, Hanshang Group would need to produce sluggish growth that's trailing the market.

If we review the last year of earnings, the company posted a result that saw barely any deviation from a year ago. Likewise, not much has changed from three years ago as earnings have been stuck during that whole time. Accordingly, shareholders probably wouldn't have been satisfied with the complete absence of medium-term growth.

This is in contrast to the rest of the market, which is expected to grow by 41% over the next year, materially higher than the company's recent medium-term annualised growth rates.

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

The Bottom Line On Hanshang Group's P/E

Hanshang Group's stock might have been given a solid boost, but its P/E certainly hasn't reached any great heights. 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.

As we suspected, our examination of Hanshang Group revealed its three-year earnings trends are contributing to its low P/E, given they look worse than current market expectations. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

Plus, you should also learn about these 3 warning signs we've spotted with Hanshang Group.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Hanshang Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.