Lacklustre Performance Is Driving Jilin Jian Yisheng Pharmaceutical Co., Ltd.'s (SZSE:002566) Low P/E

When close to half the companies in China have price-to-earnings ratios (or "P/E's") above 28x, you may consider Jilin Jian Yisheng Pharmaceutical Co., Ltd. (SZSE:002566) as an attractive investment with its 24.9x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

For example, consider that Jilin Jian Yisheng Pharmaceutical's financial performance has been poor lately as its earnings have been in decline. It might be that many expect the disappointing earnings performance to continue or accelerate, 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.

See our latest analysis for Jilin Jian Yisheng Pharmaceutical

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Jilin Jian Yisheng Pharmaceutical will help you shine a light on its historical performance.

Is There Any Growth For Jilin Jian Yisheng Pharmaceutical?

Jilin Jian Yisheng Pharmaceutical's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

Taking a look back first, the company's earnings per share growth last year wasn't something to get excited about as it posted a disappointing decline of 11%. Regardless, EPS has managed to lift by a handy 7.7% in aggregate from three years ago, thanks to the earlier period of growth. Accordingly, while they would have preferred to keep the run going, shareholders would be roughly satisfied with the medium-term rates of earnings growth.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 36% shows it's noticeably less attractive on an annualised basis.

In light of this, it's understandable that Jilin Jian Yisheng Pharmaceutical's P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

The Bottom Line On Jilin Jian Yisheng Pharmaceutical's 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 Jilin Jian Yisheng Pharmaceutical maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. 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.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Jilin Jian Yisheng Pharmaceutical that you should be aware of.

You might be able to find a better investment than Jilin Jian Yisheng Pharmaceutical. 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.