Stock Analysis

Investors Don't See Light At End Of Hangzhou Binjiang Real Estate Group Co.,Ltd's (SZSE:002244) Tunnel

Source: Shutterstock

When close to half the companies in China have price-to-earnings ratios (or "P/E's") above 30x, you may consider Hangzhou Binjiang Real Estate Group Co.,Ltd (SZSE:002244) as a highly attractive investment with its 4.4x P/E ratio. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

With earnings growth that's superior to most other companies of late, Hangzhou Binjiang Real Estate GroupLtd has been doing relatively well. One possibility is that the P/E is low because investors think this strong earnings performance might be less impressive moving forward. 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 Hangzhou Binjiang Real Estate GroupLtd

SZSE:002244 Price to Earnings Ratio vs Industry April 22nd 2024
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.

How Is Hangzhou Binjiang Real Estate GroupLtd's Growth Trending?

The only time you'd be truly comfortable seeing a P/E as depressed as Hangzhou Binjiang Real Estate GroupLtd's is when the company's growth is on track to lag the market decidedly.

Retrospectively, the last year delivered a decent 11% gain to the company's bottom line. This was backed up an excellent period prior to see EPS up by 152% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Shifting to the future, estimates from the ten analysts covering the company suggest earnings should grow by 13% over the next year. That's shaping up to be materially lower than the 35% growth forecast for the broader market.

With this information, we can see why Hangzhou Binjiang Real Estate GroupLtd 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 Final Word

We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We've established that Hangzhou Binjiang Real Estate GroupLtd maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. 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.

There are also other vital risk factors to consider before investing and we've discovered 3 warning signs for Hangzhou Binjiang Real Estate GroupLtd that you should be aware of.

If you're unsure about the strength of Hangzhou Binjiang Real Estate GroupLtd's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

Valuation is complex, but we're helping make it simple.

Find out whether Hangzhou Binjiang Real Estate GroupLtd is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at)

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.