Hangzhou Binjiang Real Estate Group Co.,Ltd (SZSE:002244) Screens Well But There Might Be A Catch

With a price-to-earnings (or "P/E") ratio of 15.9x Hangzhou Binjiang Real Estate Group Co.,Ltd (SZSE:002244) may be sending very bullish signals at the moment, given that almost half of all companies in China have P/E ratios greater than 36x and even P/E's higher than 69x are not unusual. Nonetheless, we'd need to dig a little deeper to determine if there is a rational basis for the highly reduced P/E.

Recent times haven't been advantageous for Hangzhou Binjiang Real Estate GroupLtd as its earnings have been falling quicker than most other companies. The P/E is probably low because investors think this poor earnings performance isn't going to improve at all. You'd much rather the company wasn't bleeding earnings if you still believe in the business. Or at the very least, you'd be hoping the earnings slide doesn't get any worse if your plan is to pick up some stock while it's out of favour.

See our latest analysis for Hangzhou Binjiang Real Estate GroupLtd

Keen to find out how analysts think Hangzhou Binjiang Real Estate 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 Hangzhou Binjiang Real Estate GroupLtd?

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

Retrospectively, the last year delivered a frustrating 59% decrease to the company's bottom line. The last three years don't look nice either as the company has shrunk EPS by 39% in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Shifting to the future, estimates from the eleven analysts covering the company suggest earnings should grow by 70% over the next year. Meanwhile, the rest of the market is forecast to only expand by 38%, which is noticeably less attractive.

In light of this, it's peculiar that Hangzhou Binjiang Real Estate GroupLtd's P/E sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Final Word

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.

Our examination of Hangzhou Binjiang Real Estate GroupLtd's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. It appears many are indeed anticipating earnings instability, because these conditions should normally provide a boost to the share price.

Before you take the next step, you should know about the 3 warning signs for Hangzhou Binjiang Real Estate GroupLtd (1 is concerning!) that we have uncovered.

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.