Little Excitement Around IVD Medical Holding Limited's (HKG:1931) Earnings As Shares Take 38% Pounding

IVD Medical Holding Limited (HKG:1931) shareholders that were waiting for something to happen have been dealt a blow with a 38% share price drop in the last month. Instead of being rewarded, shareholders who have already held through the last twelve months are now sitting on a 27% share price drop.

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 10x, you may consider IVD Medical Holding as an attractive investment with its 5.5x 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.

Earnings have risen firmly for IVD Medical Holding recently, which is pleasing to see. One possibility is that the P/E is low because investors think this respectable earnings growth might actually underperform 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 out of favour.

See our latest analysis for IVD Medical Holding

Although there are no analyst estimates available for IVD Medical Holding, take a look at this free data-rich visualisation to see how the company stacks up on earnings, revenue and cash flow.

How Is IVD Medical Holding's Growth Trending?

IVD Medical Holding's P/E ratio would be typical for a company that's only expected to deliver limited growth, and importantly, perform worse than the market.

If we review the last year of earnings growth, the company posted a worthy increase of 13%. The latest three year period has also seen an excellent 47% overall rise in EPS, aided somewhat by its short-term performance. Accordingly, shareholders would have probably welcomed those medium-term rates of earnings growth.

Comparing that to the market, which is predicted to deliver 20% growth in the next 12 months, the company's momentum is weaker based on recent medium-term annualised earnings results.

With this information, we can see why IVD Medical Holding is trading at a P/E lower than the market. Apparently many shareholders weren't comfortable holding on to something they believe will continue to trail the bourse.

What We Can Learn From IVD Medical Holding's P/E?

IVD Medical Holding's P/E has taken a tumble along with its share price. Generally, our preference is to limit the use of the price-to-earnings ratio to establishing what the market thinks about the overall health of a company.

We've established that IVD Medical Holding 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.

And what about other risks? Every company has them, and we've spotted 2 warning signs for IVD Medical Holding (of which 1 is significant!) you should know about.

Of course, you might find a fantastic investment by looking at a few good candidates. So take a peek at this free list of companies with a strong growth track record, trading on 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.