Golden Throat Holdings Group Company Limited (HKG:6896) Might Not Be As Mispriced As It Looks After Plunging 25%

Explore Golden Throat Holdings Group's Fair Values from the Community and select yours

Unfortunately for some shareholders, the Golden Throat Holdings Group Company Limited (HKG:6896) share price has dived 25% in the last thirty days, prolonging recent pain. Longer-term, the stock has been solid despite a difficult 30 days, gaining 13% in the last year.

In spite of the heavy fall in price, given about half the companies in Hong Kong have price-to-earnings ratios (or "P/E's") above 13x, you may still consider Golden Throat Holdings Group as an attractive investment with its 7.6x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

Earnings have risen firmly for Golden Throat Holdings Group 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.

View our latest analysis for Golden Throat Holdings Group

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 Golden Throat Holdings Group's earnings, revenue and cash flow.

Is There Any Growth For Golden Throat Holdings Group?

The only time you'd be truly comfortable seeing a P/E as low as Golden Throat Holdings Group's is when the company's growth is on track to lag the market.

Retrospectively, the last year delivered an exceptional 27% gain to the company's bottom line. The strong recent performance means it was also able to grow EPS by 70% in total over the last three years. 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 21% shows it's about the same on an annualised basis.

With this information, we find it odd that Golden Throat Holdings Group is trading at a P/E lower than the market. Apparently some shareholders are more bearish than recent times would indicate and have been accepting lower selling prices.

The Key Takeaway

Golden Throat Holdings Group's P/E has taken a tumble along with its share price. 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 Golden Throat Holdings Group currently trades on a lower than expected P/E since its recent three-year growth is in line with the wider market forecast. There could be some unobserved threats to earnings preventing the P/E ratio from matching the company's performance. At least the risk of a price drop looks to be subdued if recent medium-term earnings trends continue, but investors seem to think future earnings could see some volatility.

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

You might be able to find a better investment than Golden Throat Holdings Group. 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).

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

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.