Earnings Working Against Anhui Anke Biotechnology (Group) Co., Ltd.'s (SZSE:300009) Share Price

When close to half the companies in China have price-to-earnings ratios (or "P/E's") above 29x, you may consider Anhui Anke Biotechnology (Group) Co., Ltd. (SZSE:300009) as an attractive investment with its 21.9x 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.

Anhui Anke Biotechnology (Group) certainly has been doing a good job lately as its earnings growth has been positive while most other companies have been seeing their earnings go backwards. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. 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 Anhui Anke Biotechnology (Group)

Keen to find out how analysts think Anhui Anke Biotechnology (Group)'s future stacks up against the industry? In that case, our free report is a great place to start.

How Is Anhui Anke Biotechnology (Group)'s Growth Trending?

Anhui Anke Biotechnology (Group)'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.

Retrospectively, the last year delivered an exceptional 97% gain to the company's bottom line. The latest three year period has also seen an excellent 363% overall rise in EPS, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing earnings over that time.

Turning to the outlook, the next year should generate growth of 27% as estimated by the two analysts watching the company. With the market predicted to deliver 41% growth , the company is positioned for a weaker earnings result.

With this information, we can see why Anhui Anke Biotechnology (Group) is trading at a P/E lower than the market. It seems most investors are expecting to see limited future growth and are only willing to pay a reduced amount for the stock.

The Bottom Line On Anhui Anke Biotechnology (Group)'s P/E

While the price-to-earnings ratio shouldn't be the defining factor in whether you buy a stock or not, it's quite a capable barometer of earnings expectations.

As we suspected, our examination of Anhui Anke Biotechnology (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.

The company's balance sheet is another key area for risk analysis. Take a look at our free balance sheet analysis for Anhui Anke Biotechnology (Group) with six simple checks on some of these key factors.

Of course, you might also be able to find a better stock than Anhui Anke Biotechnology (Group). So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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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.