Gain Plus Holdings Limited (HKG:9900) Not Doing Enough For Some Investors As Its Shares Slump 28%

Unfortunately for some shareholders, the Gain Plus Holdings Limited (HKG:9900) share price has dived 28% in the last thirty days, prolonging recent pain. Looking back over the past twelve months the stock has been a solid performer regardless, with a gain of 11%.

Even after such a large drop in price, given about half the companies in Hong Kong have price-to-earnings ratios (or "P/E's") above 9x, you may still consider Gain Plus Holdings as an attractive investment with its 5.5x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

Recent times have been quite advantageous for Gain Plus Holdings as its earnings have been rising very briskly. 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 Gain Plus Holdings

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on Gain Plus Holdings will help you shine a light on its historical performance.

Is There Any Growth For Gain Plus Holdings?

In order to justify its P/E ratio, Gain Plus Holdings would need to produce sluggish growth that's trailing the market.

Taking a look back first, we see that the company grew earnings per share by an impressive 186% last year. The latest three year period has also seen an excellent 40% overall rise in EPS, aided by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

This is in contrast to the rest of the market, which is expected to grow by 23% over the next year, materially higher than the company's recent medium-term annualised growth rates.

In light of this, it's understandable that Gain Plus Holdings' P/E sits below the majority of other companies. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

What We Can Learn From Gain Plus Holdings' P/E?

The softening of Gain Plus Holdings' shares means its P/E is now sitting at a pretty low level. Using the price-to-earnings ratio alone to determine if you should sell your stock isn't sensible, however it can be a practical guide to the company's future prospects.

We've established that Gain Plus Holdings maintains its low P/E on the weakness of its recent three-year growth being lower than the wider market forecast, as expected. Right now shareholders are accepting the low P/E as they concede future earnings probably won't provide any pleasant surprises. Unless the recent medium-term conditions improve, they will continue to form a barrier for the share price around these levels.

It is also worth noting that we have found 1 warning sign for Gain Plus Holdings that you need to take into consideration.

If P/E ratios interest you, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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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.