The Market Doesn't Like What It Sees From Jianmin Pharmaceutical Group Co.,Ltd.'s (SHSE:600976) Earnings Yet As Shares Tumble 27%

Jianmin Pharmaceutical Group Co.,Ltd. (SHSE:600976) shares have had a horrible month, losing 27% after a relatively good period beforehand. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 36% share price drop.

Following the heavy fall in price, Jianmin Pharmaceutical GroupLtd may be sending very bullish signals at the moment with its price-to-earnings (or "P/E") ratio of 13.5x, since almost half of all companies in China have P/E ratios greater than 28x and even P/E's higher than 52x are not unusual. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

Recent times have been advantageous for Jianmin Pharmaceutical GroupLtd as its earnings have been rising faster than most other companies. It might be that many expect the strong earnings performance to degrade substantially, 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 Jianmin Pharmaceutical GroupLtd

Keen to find out how analysts think Jianmin Pharmaceutical GroupLtd's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Growth For Jianmin Pharmaceutical GroupLtd?

In order to justify its P/E ratio, Jianmin Pharmaceutical GroupLtd would need to produce anemic growth that's substantially trailing the market.

Retrospectively, the last year delivered an exceptional 24% gain to the company's bottom line. Pleasingly, EPS has also lifted 163% in aggregate from three years ago, thanks to the last 12 months of growth. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 19% per annum during the coming three years according to the three analysts following the company. With the market predicted to deliver 25% growth per annum, the company is positioned for a weaker earnings result.

With this information, we can see why Jianmin Pharmaceutical GroupLtd is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

What We Can Learn From Jianmin Pharmaceutical GroupLtd's P/E?

Jianmin Pharmaceutical GroupLtd's P/E looks about as weak as its stock price lately. It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

As we suspected, our examination of Jianmin Pharmaceutical GroupLtd's analyst forecasts revealed that its inferior earnings outlook is contributing to its low P/E. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Jianmin Pharmaceutical GroupLtd (1 is a bit unpleasant!) that you need to be mindful of.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.

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