TangShan Port Group Co.,Ltd's (SHSE:601000) Low P/E No Reason For Excitement

When close to half the companies in China have price-to-earnings ratios (or "P/E's") above 28x, you may consider TangShan Port Group Co.,Ltd (SHSE:601000) as an attractive investment with its 15.9x 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 growth that's superior to most other companies of late, TangShan Port GroupLtd has been doing relatively well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. 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 TangShan Port GroupLtd

If you'd like to see what analysts are forecasting going forward, you should check out our free report on TangShan Port GroupLtd.

Does Growth Match The Low P/E?

In order to justify its P/E ratio, TangShan Port GroupLtd would need to produce sluggish growth that's trailing the market.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 7.7% last year. However, due to its less than impressive performance prior to this period, EPS growth is practically non-existent over the last three years overall. So it appears to us that the company has had a mixed result in terms of growing earnings over that time.

Turning to the outlook, the next three years should generate growth of 4.5% per year as estimated by the four analysts watching the company. With the market predicted to deliver 24% growth per year, the company is positioned for a weaker earnings result.

With this information, we can see why TangShan Port GroupLtd is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on while the company is potentially eyeing a less prosperous future.

The Key Takeaway

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.

We've established that TangShan Port GroupLtd maintains its low P/E on the weakness of its forecast growth being lower than the wider market, as expected. At this stage investors feel the potential for an improvement in earnings isn't great enough to justify a higher P/E ratio. It's hard to see the share price rising strongly in the near future under these circumstances.

You should always think about risks. Case in point, we've spotted 1 warning sign for TangShan Port GroupLtd you should be aware of.

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

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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.