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

With a price-to-earnings (or "P/E") ratio of 13.7x TangShan Port Group Co.,Ltd (SHSE:601000) 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 70x are not unusual. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

There hasn't been much to differentiate TangShan Port GroupLtd's and the market's retreating earnings lately. One possibility is that the P/E is low because investors think the company's earnings may begin to slide even faster. If you still like the company, you'd want its earnings trajectory to turn around before making any decisions. At the very least, you'd be hoping that earnings don't fall off a cliff if your plan is to pick up some stock while it's out of favour.

Check out our latest analysis for TangShan Port GroupLtd

Keen to find out how analysts think TangShan Port GroupLtd's future stacks up against the industry? In that case, our free report is a great place to start.

How Is TangShan Port GroupLtd's Growth Trending?

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

If we review the last year of earnings, dishearteningly the company's profits fell to the tune of 1.3%. The last three years don't look nice either as the company has shrunk EPS by 15% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing earnings over that time.

Turning to the outlook, the next year should generate growth of 20% as estimated by the one analyst watching the company. That's shaping up to be materially lower than the 38% growth forecast for the broader market.

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. Unless these conditions improve, they will continue to form a barrier for the share price around these levels.

And what about other risks? Every company has them, and we've spotted 1 warning sign for TangShan Port GroupLtd 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.