Positive Sentiment Still Eludes Xinyi Electric Storage Holdings Limited (HKG:8328) Following 31% Share Price Slump

Xinyi Electric Storage Holdings Limited (HKG:8328) shareholders that were waiting for something to happen have been dealt a blow with a 31% share price drop in the last month. The recent drop completes a disastrous twelve months for shareholders, who are sitting on a 62% loss during that time.

Although its price has dipped substantially, you could still be forgiven for feeling indifferent about Xinyi Electric Storage Holdings' P/E ratio of 10.3x, since the median price-to-earnings (or "P/E") ratio in Hong Kong is also close to 9x. Although, it's not wise to simply ignore the P/E without explanation as investors may be disregarding a distinct opportunity or a costly mistake.

With earnings growth that's exceedingly strong of late, Xinyi Electric Storage Holdings has been doing very well. The P/E is probably moderate because investors think this strong earnings growth might not be enough to outperform the broader market in the near future. 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 not quite in favour.

Check out our latest analysis for Xinyi Electric Storage Holdings

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 Xinyi Electric Storage Holdings' earnings, revenue and cash flow.

Is There Some Growth For Xinyi Electric Storage Holdings?

There's an inherent assumption that a company should be matching the market for P/E ratios like Xinyi Electric Storage Holdings' to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 72% last year. Pleasingly, EPS has also lifted 244% in aggregate from three years ago, thanks to the last 12 months of growth. Therefore, it's fair to say the earnings growth recently has been superb for the company.

Weighing that recent medium-term earnings trajectory against the broader market's one-year forecast for expansion of 20% shows it's noticeably more attractive on an annualised basis.

In light of this, it's curious that Xinyi Electric Storage Holdings' P/E sits in line with the majority of other companies. It may be that most investors are not convinced the company can maintain its recent growth rates.

The Bottom Line On Xinyi Electric Storage Holdings' P/E

With its share price falling into a hole, the P/E for Xinyi Electric Storage Holdings looks quite average now. 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 Xinyi Electric Storage Holdings currently trades on a lower than expected P/E since its recent three-year growth is higher than the wider market forecast. When we see strong earnings with faster-than-market 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 the persistence of these recent medium-term conditions would normally provide a boost to the share price.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Xinyi Electric Storage Holdings with six simple checks will allow you to discover any risks that could be an issue.

You might be able to find a better investment than Xinyi Electric Storage Holdings. 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).

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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.

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