China Communications Construction Company Limited (HKG:1800) Doing What It Can To Lift Shares

With a price-to-earnings (or "P/E") ratio of 2.8x China Communications Construction Company Limited (HKG:1800) may be sending very bullish signals at the moment, given that almost half of all companies in Hong Kong have P/E ratios greater than 9x and even P/E's higher than 19x are not unusual. However, the P/E might be quite low for a reason and it requires further investigation to determine if it's justified.

With its earnings growth in positive territory compared to the declining earnings of most other companies, China Communications Construction has been doing quite well of late. It might be that many expect the strong earnings performance to degrade substantially, possibly more than the market, 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.

Check out our latest analysis for China Communications Construction

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

Is There Any Growth For China Communications Construction?

China Communications Construction's P/E ratio would be typical for a company that's expected to deliver very poor growth or even falling earnings, and importantly, perform much worse than the market.

Taking a look back first, we see that the company managed to grow earnings per share by a handy 4.1% last year. EPS has also lifted 20% in aggregate from three years ago, partly thanks to the last 12 months of growth. Accordingly, shareholders would have probably been satisfied with the medium-term rates of earnings growth.

Shifting to the future, estimates from the eleven analysts covering the company suggest earnings should grow by 23% over the next year. That's shaping up to be similar to the 23% growth forecast for the broader market.

With this information, we find it odd that China Communications Construction is trading at a P/E lower than the market. It may be that most investors are not convinced the company can achieve future growth expectations.

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.

Our examination of China Communications Construction's analyst forecasts revealed that its market-matching earnings outlook isn't contributing to its P/E as much as we would have predicted. When we see an average earnings outlook with market-like growth, we assume potential risks are what might be placing pressure on the P/E ratio. It appears some are indeed anticipating earnings instability, because these conditions should normally provide more support to the share price.

And what about other risks? Every company has them, and we've spotted 2 warning signs for China Communications Construction (of which 1 shouldn't be ignored!) you should know about.

If these risks are making you reconsider your opinion on China Communications Construction, explore our interactive list of high quality stocks to get an idea of what else is out there.

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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.