More Unpleasant Surprises Could Be In Store For Guangdong TianYiMa Information Industry Co.,Ltd.'s (SZSE:301178) Shares After Tumbling 29%

Unfortunately for some shareholders, the Guangdong TianYiMa Information Industry Co.,Ltd. (SZSE:301178) share price has dived 29% in the last thirty days, prolonging recent pain. The drop over the last 30 days has capped off a tough year for shareholders, with the share price down 43% in that time.

In spite of the heavy fall in price, Guangdong TianYiMa Information IndustryLtd's price-to-earnings (or "P/E") ratio of 41.3x might still make it look like a sell right now compared to the market in China, where around half of the companies have P/E ratios below 29x and even P/E's below 18x are quite common. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's as high as it is.

For instance, Guangdong TianYiMa Information IndustryLtd's receding earnings in recent times would have to be some food for thought. It might be that many expect the company to still outplay most other companies over the coming period, which has kept the P/E from collapsing. You'd really hope so, otherwise you're paying a pretty hefty price for no particular reason.

See our latest analysis for Guangdong TianYiMa Information IndustryLtd

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on Guangdong TianYiMa Information IndustryLtd's earnings, revenue and cash flow.

Is There Enough Growth For Guangdong TianYiMa Information IndustryLtd?

The only time you'd be truly comfortable seeing a P/E as high as Guangdong TianYiMa Information IndustryLtd's is when the company's growth is on track to outshine 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 40%. This means it has also seen a slide in earnings over the longer-term as EPS is down 59% in total over the last three years. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Comparing that to the market, which is predicted to deliver 35% growth in the next 12 months, the company's downward momentum based on recent medium-term earnings results is a sobering picture.

With this information, we find it concerning that Guangdong TianYiMa Information IndustryLtd is trading at a P/E higher than the market. Apparently many investors in the company are way more bullish than recent times would indicate and aren't willing to let go of their stock at any price. There's a very good chance existing shareholders are setting themselves up for future disappointment if the P/E falls to levels more in line with the recent negative growth rates.

The Bottom Line On Guangdong TianYiMa Information IndustryLtd's P/E

Guangdong TianYiMa Information IndustryLtd's P/E hasn't come down all the way after its stock plunged. Typically, we'd caution against reading too much into price-to-earnings ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

We've established that Guangdong TianYiMa Information IndustryLtd currently trades on a much higher than expected P/E since its recent earnings have been in decline over the medium-term. When we see earnings heading backwards and underperforming the market forecasts, we suspect the share price is at risk of declining, sending the high P/E lower. Unless the recent medium-term conditions improve markedly, it's very challenging to accept these prices as being reasonable.

You always need to take note of risks, for example - Guangdong TianYiMa Information IndustryLtd has 2 warning signs we think you should be aware of.

You might be able to find a better investment than Guangdong TianYiMa Information IndustryLtd. 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).

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

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.