Not Many Are Piling Into Poly Developments and Holdings Group Co., Ltd. (SHSE:600048) Just Yet

When close to half the companies in China have price-to-earnings ratios (or "P/E's") above 28x, you may consider Poly Developments and Holdings Group Co., Ltd. (SHSE:600048) as an attractive investment with its 14.9x 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.

With earnings that are retreating more than the market's of late, Poly Developments and Holdings Group has been very sluggish. It seems that many are expecting the dismal earnings performance to persist, which has repressed the P/E. If you still like the company, you'd want its earnings trajectory to turn around before making any decisions. If not, then existing shareholders will probably struggle to get excited about the future direction of the share price.

See our latest analysis for Poly Developments and Holdings Group

If you'd like to see what analysts are forecasting going forward, you should check out our free report on Poly Developments and Holdings Group.

How Is Poly Developments and Holdings Group's Growth Trending?

There's an inherent assumption that a company should underperform the market for P/E ratios like Poly Developments and Holdings Group's to be considered reasonable.

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 63%. This means it has also seen a slide in earnings over the longer-term as EPS is down 75% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of earnings growth.

Looking ahead now, EPS is anticipated to climb by 20% per year during the coming three years according to the analysts following the company. That's shaping up to be similar to the 19% per annum growth forecast for the broader market.

In light of this, it's peculiar that Poly Developments and Holdings Group's P/E sits below the majority of other companies. Apparently some shareholders are doubtful of the forecasts and have been accepting lower selling prices.

The Bottom Line On Poly Developments and Holdings Group'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 Poly Developments and Holdings Group currently trades on a lower than expected P/E since its forecast growth is in line with the wider market. When we see an average earnings outlook with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. At least the risk of a price drop looks to be subdued, but investors seem to think future earnings could see some volatility.

You need to take note of risks, for example - Poly Developments and Holdings Group has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.